Thursday, August 4, 2011

Canada Employment Change Data Release - 5 August 2011

Canada Employment Change Data Release - 5 August 2011

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

7:00am (NY Time) CAD Employment Change
Forecast 18K Previous 28.4K
Unemployment Rate 7.4%

ACTION: USDCAD BUY 48.0K SELL -12K

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 (18K) versus the actual release number; if we get a positive 48K 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 -12K 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 last month’s IVEY PMI release surprising to the upside, market may speculate that the Employment Change today may be also better than expected... However, recent sharp drop in both month GDP and CPI readings are putting CAD in a very tight spot for further strengthening.

Considering that recent BOC comments on how it has started the process of withdrawing stimulus, the overall outlook for the CAD remains optimistic. But unless we see a sudden tick up in inflationary pressure, it is likely that BOC will keep rates unchanged until into 2012.

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 Consideration

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.”

by Henry Liu