Canadian Dollar Surges on Another Stellar Job Report, Dollar Struggles after Mixed NFP

Canadian dollar soars in early US session after another month of stellar job data. The employment market grew and impressive 78.6k in December, just slightly smaller than prior month’s 79.5k. It’s also well above expectation of 0k growth. Unemployment ate, dropped to 5.7%, down from 5.9% and was way below expectation of 6.0%. That’s also the lowest level in more than four decades, since the series began in 1976. The strength in job market is sealing the deal for BoC to hike again in Q1. And there could be more speculations for a January hike ahead. USD/CAD dives through 1.2380 handle, comparing to 1.2500 just an hour ago. Also from Canada, trade deficit came in larger than expected at CAD -2.5b in November.

Dollar, on the other hand, is trading a touch softer after mixed job data. Non-farm payrolls report showed 148k job growth in December, well below expectation of 189k. But prior month’s figure was revised up from 228k to 252k. Unemployment rate was unchanged at 4.1% as expected. The positive part is that average hourly earnings grew 0.3% mom, meeting expectation. While the set of NFP data still indicates very healthy job market in the US, it’s not doing much to solidify three Fed hikes this year. Also from US, trade deficit widened to USD -50.5b in November.

Technically, EUR/USD is still holding below 1.2091 resistance. USD/CHF is kept well above 0.9698 temporary low. USD/JPY is in range of 112.02/112.05. With the exception of USD/CAD, there is no clear sign of post-data direction in other Dollar pairs.

Released earlier today, Eurozone CPI slowed to 1.4% yoy in December, in line with consensus. But core CPI was unchanged at 0.9% yoy, missing expectation of 1.0% yoy. PPI jumped to 2.8% yoy in November, though. Eurozone retail PMI rose to 53 in December. German retail sales was strong and grew 2.3% mom in November. From Australia, trade balance unexpectedly turn into AUD -0.63b deficit in November, much worse than expectation of AUD 0.55b surplus. Japan monetary base rose 11.2% yoy in December. UK BRC shop price index dropped -0.6% yoy in December.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2462; (P) 1.2508; (R1) 1.2534; More….

Dollar’s fall accelerates to as low as 1.2366 so far and breaks 61.8% retracement of 1.2061 to 1.2919 at 1.2389. Based on current momentum, it’s getting more likely that fall from 1.2919 is resuming larger down trend. Intraday bias stays on the downside as long as 1.2480 minor resistance holds. Sustained trading below 1.2389 will pave the way to 1.2061 low. On the upside, above 1.2480 will turn intraday bias neutral first.

In the bigger picture, current near term downside acceleration argues that USD/CAD was rejected by 55 week EMA (now at 1.2850. And the rebound from 1.2061 is possibly completed at 1.2919. More importantly, larger fall from 1.4689 (2016 high) could be resuming. Decisive break of 1.2061 low will target 61.8% retracement of 0.9406 to 1.4689 at 1.1424. Nonetheless, break of 1.2623 will revive the original case of bullish reversal and would resume the rebound from 1.2061 to 38.2% retracement of 1.4689 to 1.2061 at 1.3065.

Economic Indicators Update