Markets eye US, Canadian job data

4. Juni 2021

The Canadian dollar is steady in Friday trade, after sustaining considerable losses a day earlier. In the North American session, USD/CAD is trading at 1.2118, up 0.11% on the day.

The US dollar was broadly higher on Thursday, as the Fed surprised the markets when it announced that it will begin to scale back its portfolio. The Fed ended its purchase of corporate bonds in 2020, and will now gradually sell these assets.

The Fed has taken pains to emphasise that this sale is not a monetary policy action, as it does not affect the purchase of government bonds. The latter is intended to improve economic conditions and keep borrowing costs at ultra-low levels. Still, this most recent move has boosted the US dollar, as it appears to signal a move towards tapering QE and potentially raising interest rates. More Fed members are coming out and publicly urging the Fed to hold a discussion about tapering, and this has investors keeping a sharp eye on inflation and employment figures, which could be instrumental in any Fed decision with regard to tapering.

The market will quickly shift focus from the Fed to the US employment report (12:e30 GMT). The consensus stands at 644 thousand, which would be a strong acceleration from the April release of 266 thousand. However, the markets are well aware that recent forecasts for NFP have been wide of the mark, including the April reading, as the consensus was 990 thousand. This week's ADP Employment Report showed a gain of 978 thousand, crushing the estimate of 645 thousand. However, the APDP reading is not a reliable indication of how official nonfarm payrolls will perform.

Canada will also release key job data (12:30 GMT), with the market expecting soft numbers. April was dismal, as the economy shed 207.1 thousand jobs. May is expected to show a small decline of 20.0 thousand. The unemployment rate is projected to edge up to 8.2%, down from 8.1%

USD/CAD is putting pressure on resistance at 1.2137. This line was tested last week. This is followed by resistance at 1.2195. With the pair moving higher, 1.2025 has some breathing room as support. Below, there is support at 1.1971