After two months of superb job gain, Canada saw a drop of 21,900 jobs during January. This was below expectations for a modest gain of 4.5K jobs. However, the unemployment rate surprised by falling from 7.1% to 7%. A rise to 7.2% was expected. The drop in the unemployment rate is due to a drop in the participation rate: from 66.8% to 66.6%.
USD/CAD is now trading at 1.0030, up 45 pips from the range seen earlier in the day. Also housing starts hurt the loonie.
Housing starts dropped from 197K to only 161K, far lower than expectations for 196K. This joins the growing talk about a burst of the housing bubble. This is the lowest post financial crisis figure.
On the positive side, Canada’s trade balance deficit squeezed more than expected: from 1.7 to 0.9 billion, beating expectations of 1.5 billion. Also Canada’s biggest trade partner, the US, reported a better-than-expected trade deficit: 38.5 instead of 45.7 billion.
The next level above is 1.066, followed by 1.01. On the downside, parity now provides support, followed by 0.9950. For more, see the USD/CAD forecast.
