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Canadian dollar signals uptrend on strong jobs additions

Considering the strong rise in the Euro zone PMI and poor retail sales in Canada, on February 24th, we had suggested a long position in the EUR/CAD pair at 1.3860, with a target of 1.3980.

To binary traders we had suggested purchasing a high or above option with expiry on March 3rd. The targets were met with relative ease. The strong rally took the EUR/CAD pair to a high of 1.4380.

On the basis of the details provided herewith, we anticipate a short-term correction in the EUR/CAD pair.

Last Wednesday, the Canada Mortgage and Housing Corporation reported an increase in the number of new residential buildings constructed to 210,000 in February, from 209,000 in January, and higher than analysts’ expectation of 205,000.

Bloomberg

Similarly, according to the Statistics Canada, building permits increased 5.4% m-o-m in January, versus market’s expectation of 3.1% growth. In December, the building permits declined 4.4% on m-o-m basis.

Two days later, Statistics Canada stated that the Canadian economy added 15,300 jobs in February, compared with analysts’ expectation of mere 600 jobs. In the previous month, the economy added 48,300 jobs. It is the seventh straight month of jobs addition, which indicates that the economy is on the track of recovery, after last year’s wildfire resulted in an economic contraction. The unemployment rate also dipped to 6.6% in February, versus analysts’ expectation of 6.8%. The unemployment rate stood at 6.8% in the previous month.

In the mainland Europe, Destatis announced that the German exports increased 11.8% y-o-y in January. However, the country’s trade balance of €18.5 billion in January was lower than analysts’ expectation of €19.2 billion. In the meanwhile, Insee (National Institute of Statistics and Economics) of France reported a 0.3% m-o-m decline in the French industrial production in January. It was a huge disappointment to the market, which was expecting a 0.6% increase in the industrial production. Thus, economic data is expected to drive the Canadian dollar upwards against the Euro in the week ahead.

The EUR/CAD price chart shows the existence of strong resistance at 1.4420. The RSI indicator is in the overbought region. Thus, chart hints of a possible downtrend.

EUR/CAD Pair: March 13th 2017

EUR/CAD Pair: March 13th 2017

To capitalize on the Euro’s weakness against the Loonie, a short position can be created near 1.4420. The trading related risk can be reduced by placing a stop loss order above 1.4520. The profit for the trade can be taken near 1.4150.

A binary trader can use the forecasted downtrend to his advantage by purchasing a put option contract when the EUR/CAD pair trades near 1.4420. Any short-term expiry period ranging from five to eight trading days can be chosen for the contract.


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