Forex Analysis For Canada Employment Change: April 5, 2012

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

7:00am (NY Time) CAD Employment Change Forecast 15K Previous 2.3k
Unemployment Rate 7.6%
ACTION: EUR/CAD SELL 50K/BUY USD/CAD -5K

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 25K, or the difference between the Forecast number (15K) versus the actual release number; if we get a positive 40K of release, we should see demand for the CAD rise, therefore we should SELL EUR/CAD; however, if we get a negative deviation, such as -10K 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 is expected remain unchanged at 7.6%. 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.

The Market

CAD has been strengthening on the back of recent tension in the Middle East and the fact that USD has retraced its gains on speculations that US QE3 might still be a possibility; of course a positive outcome in the Greek PSI debt exchange deal will promote risk appetite sentiment, which should add demand for commodity currencies such as CAD.

Additional Thoughts
USDCAD 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…

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.”