[AndrewWoo]

On Friday, US July employment grabbed most of the attention, as the headline number was so much better than expected. However, the Canadian report is also worth some analysis, albeit for different reasons. On the positive side, Canada’s July unemployment rate was lower than expected at 8.6%, compared with a consensus forecast of 8.8%. However, the net change in employment was markedly weaker than expected at -44,500 versus -7,400 previously and a consensus forecast of around -15,000. Note that the net change in employment has now been negative for eight of the past nine months. Moreover, the Ivey PMI was also disappointing at 51.8 versus 58.2 and a consensus of around 54.0.

USD-CAD may see further near-term gains in the wake of these numbers. Granted, it had already made a floor of 1.0633 on 4 August and had begun to turn. Nevertheless, the ongoing deterioration in Canadian employment appears to contrast markedly with that of the US. To be sure, better times in the US will eventually benefit Canada. For the moment, however, this contrast is likely to catch the market’s focus, particularly at a time when investors are already so long CAD – as the IMM data confirms. Technically, we would look for an extension of this bounce back towards the 55-day MA of 1.1192.