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In a disappointing turn of events, the Canadian employment report last Friday came in considerably in waaaaaaaaay worse than expected. What the heck happened?

The forecast was for an increase of 9,600 in the number of people employed, but the actual result showed that 30,400 people lost jobs instead. Meanwhile, the unemployment rate, which was projected to remain at 7.2%, jumped to 7.3%.

It was the first negative number in five months, suggesting that there might be a slowdown in employment. Moreover, unemployment hasn’t changed much since last year. In August 2011, the unemployment rate was only slightly lower at 7.2%.

Don’t be fooled by the headline numbers though. Digging deeper, you’ll see that the huge decline in unemployment was actually caused by companies shedding their part-time employees, and not full-time workers.

While it’s considered a “bad” figure, there is a silver lining. And this silver lining was what traders focused on.

Nationally, July saw a 21,300 gain in full-time employment. It doesn’t offset the 51,600 reductions in part-time workers, but it is an improvement. After all, full-time workers are usually the ones that last long in their jobs. Average wages also got better. It’s up 3.6% higher from last year.

USD/CAD 15-minute Chart

USD/CAD‘s price action tells us just how optimistic investors were. The pair blasted above the .9950 handle like it was a bullet on paper at the release of the report, but it quickly erased all its intraday gains as soon as traders read the details of the data.

The pair dropped to its Asian session support and even marked its sixth straight drop in the daily chart. Booyeah!

What does this mean for the Loonie, you ask?

Well, last Friday’s price action just shows us that the Loonie still has a lot of firepower behind it. USD/CAD has already fallen by almost 550 pips from its peak in June this year, and it looks like the drop isn’t going to end anytime soon.

Be careful jumping in the downtrend though. As I pointed out last weekend, it’s possible that USD/CAD could bounce, or at the very least, retrace. But for now, we can’t deny that a lot of investors consider the Canadian dollar as one of the strongest major currencies against the Greenback.

How about you? Where do you think USD/CAD is headed? Will it soon bounce up, or will it continue dropping in the charts?