Canada’s employment data to be released today

The main event of the day is Canada’s employment data for September.

MORNING OVERVIEW

We’re looking forward to the release of Canada’s employment data for September, in which the unemployment rate is expected to increase from 6.4% to 6.5%.

MARKET SNAPSHOT

KEY MARKET THEMES

01 — Canada’s employment data for September

The Canadian employment data for September is due to be released this afternoon. According to estimates by economists, the employment change figure for September is set to improve to 9.2k from -41.7k, implying a resilient labour market. However, when looking at the unemployment rate , it is expected to increase from 6.4% to 6.5%, implying a loosening labour market, which in turn could overshadow the anticipated improvement in the employment change figure. As such, should the unemployment rate come in as expected or higher it could weigh on the Loonie, whereas the employment change figure, should it showcase an improvement, could mitigate the negative implications for the CAD.

Market implication (CAD): Bearish

02 — Trump states that they will not attack Iran prior to the midterms

US President Donald Trump said on Thursday that the US will not attack Iran before the November 3 midterm elections, adding that the two countries are having “productive” talks, according to Reuters. The comments follow reports that the White House had asked the Pentagon to prepare strike options, and come as Iran and the US have exchanged proposals aimed at ending the six-month-old war and reopening the Strait of Hormuz. However, Trump rejected Tehran’s latest offer, and Iranian state media reported that Tehran would not abandon uranium enrichment or hand over its uranium stockpile. Therefore, market participants may be weighing whether the pledge reduces near-term supply risks or simply delays a resolution. Overall, the comments could ease some of the geopolitical risk premium in oil prices, yet the lack of progress on enrichment and the unresolved Hormuz disruption could keep crude supported.

Market implication (OIL): Neutral

03 — ECB President Lagarde signals that the bank has the tools stabilize the markets

ECB President Christine Lagarde told euro-area finance ministers that the central bank has the instruments to stabilise financial markets if required, according to Bloomberg, citing people familiar with the talks. Asked about sovereign spreads at a closed-door meeting in Luxembourg, she reportedly said the ECB has tools to counter unwarranted, disorderly market dynamics that threaten the smooth transmission of monetary policy, subject to clear eligibility criteria, while declining to comment on individual countries. The remarks come after a sudden selloff in French bonds raised questions about how the ECB might respond. On inflation, Lagarde said energy prices are rising steeply but there are no signs yet of broadening price pressures. Therefore, market participants may be watching whether the comments calm sovereign bond markets, particularly French debt.

Market implication (EUR) : Neutral

WHAT MATTERS TODAY

Canada’s Unemployment rate for September

Time (GMT+2): 15:30

Expected: 6.5%
Previous: 6.4%

Potential market reaction:
Could weaken CAD

ASSET FOCUS

[Gold / Commodities]

XAU/USD appears to be moving in a downwards fashion. We opt for a bearish outlook  for the bullion’s price. Supporting our case is the RSI indicator below our chart which currently registers a figure close to 40 implying a bearish market sentiment, in addition to the MACD indicator below our chart. For our bearish outlook to continue we would require a break below our 4080 (S1) support level, with the next possible target for the bears being our 3945 (S2) support line. On the other hand, for a bullish outlook we would require a clear break above our 4200 (R1) resistance line with the next possible target for the bulls being our 4350 (R2) resistance level. Lastly, for a sideways bias we would require gold’s price to remain confined between our 4080 (S1) support level and our 4200 (R1) resistance line.

KEY LEVELS

• Resistance (R1): 4200
• Resistance (R2): 4350
• Support (S1): 4080
• Support (S2): 3945

Technical View: Bearish

CROSS-ASSET VIEW

TRADING SPHERE VIEW

Bearish for the EUR

Our base case:
Continued political uncertainty in France, Germany and Spain which are currently seeing a shift in support from the incumbent government to the opposition raises concerns in the Zone.

What would change our view:
Polling data showcasing support for the incumbent Governments

RISKS TO THE VIEW

Snap elections being called

Snap elections being called in France and Germany.

TODAY’S WATCHLIST

01 Canada’s Employment data

DISCLAIMER: This content is for general informational and educational purposes only and should not be considered investment advice or investment recommendation.