How Canadian employment figures affect USD/CAD: technical and fundamental analysis

Technical Portrait of USD/CAD Before Data Release

The USD/CAD pair demonstrates a confident upward trend, trading near 1.3871. The chart shows that the 20-day exponential moving average has moved to 1.3793, and current quotes remain above this critical support level. The RSI (Relative Strength Index), period 14, signals a value of 60, indicating positive momentum without overbought signals.

From the local peak at 1.4142 to the low of 1.3646, the dollar has bounced back to the 50% Fibonacci correction level at 1.3894. This level is key: if the quotes move above it, an extension of the rally towards the 61.8% correction at 1.3952 can be expected. On the other hand, failure to push the pair above 1.3894 may lead to weakening of the bullish scenario with a subsequent pullback to the 23.6% Fibonacci level at 1.3763.

Expected Canadian Labor Market Data

Statistics Canada will release the December employment report precisely at 13:30 GMT. Consensus expects a loss of 5,000 jobs, contrasting with November’s gain of 53,600 positions. The unemployment rate is projected to rise to 6.6% from the previous 6.5%.

Average hourly wages remain a focus for market participants as an inflation pressure barometer. In November, this indicator increased by 4% year-over-year — a figure indicating sustained price pressure in the labor segment.

How Weak Employment Changes Expectations for Interest Rates

The Bank of Canada has maintained the base rate at 2.25% over the last two meetings, emphasizing that this rate supports keeping inflation near the 2% target corridor. However, if employment data turn out worse than forecasts, it will reinforce expectations of possible rate cuts in the near future. Cooling in the labor market is one of the main catalysts for reassessing rate expectations.

It is precisely through this mechanism that weak Canadian employment can negatively impact the Canadian dollar, as lower rates reduce the attractiveness of assets denominated in CAD.

Forecast for USD/CAD After Data Release

If the employment report disappoints, USD/CAD may remain under pressure, but the technical picture leaves room for support. Conversely, stronger-than-expected employment data would strengthen the Canadian dollar’s position and trigger a correction in the currency pair.

(Technical analysis includes insights generated using AI tools.)