Thursday, July 7, 2011

Canada Employment Change Data Release - July 8, 2011

We´ll be getting the Canadian Employment Change release number tomorrow, here is the forecast:


7:00am (NY Time) CAD Employment Change 

Forecast 13K 
Previous 22.3K 
Unemployment Rate 7.4%

ACTION: USDCAD BUY 45.0K SELL -15K


The Trade Plan


The Canadian Employment Change report will be released at 7:00am sharp today. What I am looking for is a minimum deviation of around 30K, or the difference between the Forecast number (13K) versus the actual release number; if we get a positive 45K of release, we should see demand for the CAD rise, therefore we should SELL USD/CAD; however, if we get a negative deviation, such as -15K or worse, we should see some weakness in the CAD, and that will be my cue to BUY USD/CAD pair.

I´ll also pay close attention to the unemployment rate, which stands at 7.4%. As long as this number does not conflict with the Employment Changes, we should follow the direction of the news release. If we get a conflict, such as better Employment Changes but higher Unemployment Rate, then we´ll need to look at the context of the market before taking the trade.

I´ll be looking to trade this release using my after-news Retracement Method.

The Market


With Thursday’s IVEY PMI release coming at slightly better than expectation, market may speculate that the Employment Change today may be also better than expected… However, aside from a recent rise in inflationary pressure, both recent GDP and Retail Sales came out flat, or 0.0%, showing stagnation in the current growth of Canadian economy.

Therefore, I’d recommend to follow the trade plan and stay away from any pre-news trading.

Additional Thoughts


USD/CAD is a slow moving currency pair, it will move on a strong deviation, but retracement is usually non-existent or very small... Therefore, if we get a strong release, especially when it is going with the pre-market trend, a sooner than later entry should add more pips to your account. Expect to see a spike down -> stall -> another spike down...

Pre-news Considerations

No Pre-news trading.

DEFINITION


"Measures the change in number of employed people during the previous month. A rising trend has a positive effect on the nation´s currency. Job creation is an important indicator of economic health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises."
Thanks,