Trading the News: Canadian Employment Change

What is Expected
Time of release: 07:00 EST, 11:00 GMT 6/08/2007
Primary Pair Impact : USD/CAD
Expected: 14.4K
Previous: -5.2K





How To Trade This?

The Canadian Net Change in Employment report has produced mixed results through the past three releases, leaving a theoretical balance of 30 pips in gains. Overall Canadian dollar gains limited post-news trade profits on April’s disappointment, but waning bullishness on a USDCAD bounce may improve the likelihood of a further retrace in price. Traders will likely react strongly to surprises in either direction on the monthly labor data, but it seems as though risks may be increasingly weighed to the downside for the domestic currency. This is especially true after April’s contraction in employment—traders limited CAD declines on expectations that subsequent months would show improvement in labor growth.

Given expectations of a strong employment gain, the USDCAD may have difficulty moving lower if numbers do not surprise strongly to the topside. Likewise significant, overall Canadian dollar momentum has slowed on the USDCAD’s move off of 1.0550—leaving risks of a further short-term bounce. If Employment Change posts a positive surprise, however, we will nonetheless go short the USDCAD on a post-news trade. Wait for a 5-minute confirmation of a CAD-bullish price move to sell USDCAD, setting stops above immediate swing-highs. Profit potential may be limited if the pair is unable to clear significant support, requiring a watchful eye to determine optimal take-profit points.

A disappointment in the headline print arguably provides the better post-news trading potential, as the USDCAD seems likely to retrace some of its extended declines. If numbers surprise to the downside, the news trader should be prepared to go long the USDCAD on confirmation of a CAD-bearish move. Stops shall be set below immediate swing-lows, while initial profit targets should be a similar distance away to the topside.



Antonio Sousa is a Currency Analyst for FXCM.