The Canadian labor market shows signs of slowing down.

The Canadian dollar remained stable over the past week as investors continued to assess Canadian labor market data. Although the unemployment rate held steady at 6.6% in February, the economy added only 1,000 jobs, significantly below the expected 20,000. This indicates a clear slowdown from previous strong growth, leading investors to anticipate that the Bank of Canada will cut interest rates by 25 basis points in next week’s meeting.

Canada's GDP grew by 0.6% in the second half of 2024, primarily driven by household consumption spending, which increased by 1.4%. This marks the strongest growth since 2022, with key contributors being purchases of vans and personal vehicles, along with higher spending on financial services and other consumer goods. Additionally, domestic exports of goods and services increased by 1.8% after a 0.2% decline in Q3, with key exports including gold, silver, and crude oil. Meanwhile, imports of goods and services rose by 1.3%, largely driven by increased purchases of metal ores, pharmaceuticals, and medical supplies.

Canada’s trade balance expanded to CAD 4 billion in January, exceeding market expectations of CAD 1.3 billion, as exports surged. Canadian exports increased by 5.5%, while imports rose by only 2.3%. Exports reached a record high of CAD 74.5 billion after a 6.0% increase in December. This export growth was fueled by additional tariff charges from the U.S., which led to a 12.5% increase in automotive exports, a 4.8% rise in energy products, and a 7.8% increase in consumer goods. By country, exports to the U.S. saw the most significant increase, reflecting concerns over uncertainty regarding U.S. import tariff policies.

Canada’s manufacturing PMI fell to 47.8 in February from 51.6 in the previous month, marking the first contraction in factory activity in a year. The decline was driven by a contraction in both output and new orders, with businesses noting increased caution from trade partners due to uncertainty over Canada-U.S. trade policies. As a result, export orders saw their sharpest drop in a year, impacting employment levels as companies had to reduce hiring due to lower workloads.

Meanwhile, the services PMI fell to 46.6 from 49 in the previous month, marking the third consecutive month of contraction and the fastest decline in five months. Business activity weakened significantly, with companies remaining hesitant to invest due to uncertainty over U.S. import tariffs. This led to the highest level of layoffs since the COVID-19 pandemic. Additionally, input costs surged to their highest level in a year due to rising labor expenses. However, businesses continue to expect that the Bank of Canada will further lower interest rates to stimulate economic activity in the coming year.

The yield on Canada’s 10-year government bonds surged to 3.1% following recent policy moves in the U.S., including a temporary exemption on certain tariff increases and a reduction in energy tariffs to 10%, which eased some investor concerns. However, Canada's economic growth outlook remains weak, prompting the Bank of Canada to cut interest rates six times in a row. This has increased demand for long-term Canadian bonds. Meanwhile, U.S. government bond yields continue to rise, reflecting a weakening labor market and new expectations regarding fiscal tax hikes.

Techical analysis data (5H)

Resistance: 1.4427, 1.4472, 1.4517

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.4292 - 1.4337 but cannot break the support at 1.4337, you may set a TP at approximately 1.4472 and SL at around 1.4247 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.4427 - 1.4472, you may set a TP at approximately 1.4517 and SL at around 1.4292 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.4427 - 1.4472 but cannot break the resistance at 1.4427, you may set a TP at approximately 1.4292 and SL at around 1.4517 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.4292 - 1.4337, you may set a TP at approximately 1.4247 and SL at around 1.4472 or according to your acceptable risk.

Pivot point March 8, 2025 09:05 PM. GMT+7