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The Canadian economy continued to produce jobs in February, adding 15.3k positions on net. Labour market participation fell slightly, resulting in a 0.2 percentage point drop in the unemployment rate to 6.6.

The high level details of the report were strong, with 105.1k net new full-time positions added – the strongest gain since May of 2006. Offsetting this was a 89.1k drop in part-time jobs. The advance was driven by employees (+10k), with a smaller net gain in self-employment (+5k)

By broad sector, it was the private sector (+16.7k) that drove the increase, as the public sector shed jobs on net in February (-6.8k).

Gains were led by the service side of the economy (+30.1k), as employment among goods-producers pulled back (-14.8k). On the positive side of the ledger were trade (+19.1k), public administration (+11.9k), and transportation (+8.8k). The largest net job declines were seen in construction (-8.5k), manufacturing (-5.2k), and professional services (-4.5k).

The overall gain in net employment masked a divergent regional performance: British Columbia (+19.4k) and Saskatchewan (+8.0k) saw healthy net gains, while Quebec (-11.1k) and Nova Scotia (-6.8k) were among those reporting declines.

In spite of the strong gains in full-time work, hour worked fell by 0.3% year-on-year in February – their third consecutive decline. Similarly, hourly earnings grew just 1.1% year-on-year, continuing the trend of weakness that has emerged since the summer of last year.

Key Implications

Wow. Another month of jobs data, and another strong print that confounded market expectations. While this data series can be quite noisy, a robust trend in hiring has begun to emerge, reinforced by gains in full-time work, and suggesting the narrative that the Canadian economy has started to shake off many of the setbacks it faced in the past few years.

If there is a fly in the ointment, it has to be the ongoing declines in hours worked. This suggests that even with strong gains in full-time work, the jobs being created may be at the lower end of the hours scale –perhaps pointing to a change in the quality of work on offer (Statistics Canada defines full-time as working 30 or more hours per week). Further evidence regarding quality comes from the hourly earnings figures, which have been quite weak as of late. On this point, however, we note that other, less timely employment surveys point to still healthy wage growth.

For the Bank of Canada, February's figures will undoubtedly be welcome. That said, the Bank of Canada doesn't target employment, and from an inflation perspective there is little here to move the needle in the near term in light of weakness in reported wage growth. That said, today's report does to the mounting evidence that the Canadian economy is seeing a return to sustained healthy growth, which should absorb remaining slack and lead to eventual inflationary pressures. This process will take time, however, and the Bank of Canada will want to continue supporting it and will likely be reluctant to raise rates until well into next year.

EUR/GBP - 0.8737

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term down

Original strategy  :

Buy at 0.8600, Target: 0.8700, Stop: 0.8560

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.8660, Target: 0.8760, Stop: 0.8620

Position : -

Target :  -

Stop : -

 
As the single currency has continued moving higher after breaking above resistance at 0.8646, adding credence to our view that the fall from 0.8857 has ended at 0.8403 and upside bias remains for the rally from there to extend further gain to 0.8750, then 0.8770, however, loss of near term upward momentum should prevent sharp move beyond latter level and price should falter well below 0.8800, risk from there is seen for a retreat to take place later.

In view of this, would not chase this rise here and we are looking to buy euro on pullback as 0.8600 should limit downside. Below support at 0.8547 would suggest first leg of rebound from 0.8403 has ended, bring weakness to 0.8520-25 but support at 0.8509 should contain downside and bring another rise later. 

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.3449

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term up

 
Original strategy       :

Buy at 1.3400, Target: 1.3570, Stop: 1.3340

Position: -

Target:  -

Stop: -

 
New strategy             :

Buy at 1.3350, Target: 1.3550, Stop: 1.3290

Position: -

Target:  -

Stop:-

The greenback has retreated after rising to 1.3535, suggesting consolidation below this level would be seen and initial downside risk is for pullback to 1.3400, however, reckon downside would be limited to 1.3370-75 support and renewed buying interest should emerge around 1.3350-55 (38.2% Fibonacci retracement of 1.3056-1.3535) and bring another rise later, above said resistance at 1.3535 would extend recent upmove for further gain to 1.3570-75 and possibly towards 1.3600 but near term overbought condition should prevent sharp move beyond 1.3640-50, bring retreat later.

In view of this, would not chase this rise here and would be prudent to buy on further pullback as 1.3350 should limit downside. Only below 1.3295-00 (50% Fibonacci retracement of 1.3056-1.3535) would signal top is formed, risk correction to 1.3250-60 but price should stay well above indicated previous resistance at 1.3212 (now support), bring another rise later.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

Daily Pivots: (S1) 114.47; (P) 114.74; (R1) 115.19; More...

USD/JPY retreats mildly in early US session but at this point, intraday bias remains on the upside. Current development indicates near term reversal on double bottom pattern (111.58, 111.68). That's whole correction from 118.65 is completed at 111.58. Further rally would be seen to retest 118.65 resistance. Break will resume whole rally from 98.97 and target 125.85 high next. On the downside, break of 113.60 support is now needed to indicate completion of the current rise. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

Daily Pivots: (S1) 1.2131; (P) 1.2163; (R1) 1.2193; More...

A temporary low should be in place at 1.2133 in GBP/USD and intraday bias is turned neutral first. Upside of recovery should be limited by 1.2346 support turned resistance and bring another decline. As noted before, consolidation pattern from 1.1946 should have completed with three waves to 1.2705 already. Below 1.2133 will target 1.1946/86 support zone. Break of 1.1946 will confirm our bearish view and resume the larger down trend.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term bottoming yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

Daily Pivots: (S1) 1.0087; (P) 1.0124; (R1) 1.0156; More.....

USD/CHF's pull back from 1.0169 extends lower today but it's staying well above 1.0008 support so far. Intraday bias remains neutral for the moment. Further rise cannot be ruled out with 1.0008 support intact. However, based on neutral medium term outlook, we'd be cautious on topping at around 1.0342. This is supported by the corrective structure of the rise from 0.9860 so far. On the downside, break of 1.0008, however, will indicate completion of the rebound from 0.9860. And intraday bias will be turned back to the downside for 0.9860.

In the bigger picture, prior rejection from 1.0327 resistance argues that USD/CHF is staying in a medium term sideway pattern. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone. Meanwhile firm break of 1.0342 will target 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

Daily Pivots: (S1) 1.0528; (P) 1.0572 (R1) 1.0619; More.....

EUR/USD extends the post-ECB rally today and breaches 1.0630 resistance again. The development suggests that pull back from 1.0828 has completed at 1.0493 already. More importantly, corrective rise from 1.0339 is possibly still in progress for another rising leg. Intraday bias is mildly on the upside for 1.0678 resistance first. Break will send EUR/USD through 1.0828 resistance.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Dollar weakens against Euro, Aussie and Canadian in early US session despite solid non-farm payroll report. The selloff is, at this point, seen as a sell-on-news move. Canadian dollar is supported by its own job data. The set of NFP should have done nothing to alter Fed's decision to hike interest rate next week. Nonetheless, without a surge in wage growth, the report doesn't add to the case for more than three hikes this year. Focus will turn to next week's FOMC meeting, with new economic projections.

NFP showed 235k growth in the US job market in February, above expectation of 190k. Prior month's figure was revised up from 227k to238k. Unemployment rate dropped 0.1% to 4.7% as expected. Average hourly earnings rose 0.2% mom in February, missing expectation of 0.3% mom. Nonetheless, prior month's wage growth was revised up from 0.1% mom to 0.2% mom. Canadian job market grew 15.3k in February, way better than expectation of -15.5k. Unemployment rate also unexpectedly dropped to 6.6%, versus consensus of 6.8%.

UK inflation expectations climbed to three year high

The BoE's quarterly Inflation Attitudes survey released today showed inflation expectation surged to highest level in three years. The consumer medium expectation for price growth over the next 12 months was at 2.9%, highest since 2013. That was up from prior 2.8% at prior survey back in November. Five year inflation expectations jumped to 3.2%, up from prior 3.1%. Meanwhile, 42% of respondents expected interest rates to rise over the next 12 months. 28% said interest rate would stay unchanged. Only 6% expected inflation rate to fall.

Released from UK, industrial production dropped -0.4% mom, rose 3.2% yoy in January. Manufacturing production dropped -0.9% mom, rose 2.7% yoy. Construction output dropped -0.4% mom. Visible trade deficit narrowed to GBP -10.8b. Also from Europe, German trade surplus widened slightly to EUR 18.5b in January.

Short term JGB yields rose

In Japan, short term JGB yields rose today as BoJ reduced the size of purchase of corresponding maturities. The one- to three- year JGB purchase was lowered to JPY 300b, JPY 20b lower than prior purchase last week, and was the smaller amount since September 2014. Purchase of discount bills was lowered to JPY 250b, smallest since 2015. Two year JGB yield rose 1.5 basis points to -0.255%. Three-month bill yields rose 1.5 basis points to -0.399%. Japan's BSI large manufacturing index dropped to 1.1 in Q1.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0528; (P) 1.0572 (R1) 1.0619; More.....

EUR/USD extends the post-ECB rally today and breaches 1.0630 resistance again. The development suggests that pull back from 1.0828 has completed at 1.0493 already. More importantly, corrective rise from 1.0339 is possibly still in progress for another rising leg. Intraday bias is mildly on the upside for 1.0678 resistance first. Break will send EUR/USD through 1.0828 resistance.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Economic Indicators Update

USD/CHF - 1.0130

Original strategy :

Buy at 1.0100, Target: 1.0200, Stop: 1.0070

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0100, Target: 1.0200, Stop: 1.0070

Position : -

Target :  -

Stop : -

As the greenback found good support at 1.0092 and has staged a strong rebound, suggesting low is possibly formed there and consolidation with mild upside bias is seen for gain to 1.0145-50, however, break of resistance at 1.0171 is needed to signal recent erratic rise from 0.9861 low has resumed and extend further gain to 1.0200-10 but near term overbought condition should limit upside to 1.0220-25 and price should falter below previous chart resistance at 1.0248.

In view of this, we are looking to buy dollar on dips as 1.0100 should limit downside and bring such rise. Below support at 1.0073 would abort and signal top has been formed instead, risk weakness to 1.0040-45 but reckon support at 1.0009 would remain intact. 

GBP/USD - 1.2150

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has recovered after holding above support at 1.2135, suggesting consolidation above this level would be seen and corrective bounce to 1.2210-15 is likely, however, reckon upside would be limited to 1.2245-55 but price should falter well below resistance at 1.2301, bring another decline later.

In view of this, would not chase this fall here and would be prudent to stand aside in the meantime. Below said support at 1.2135 would signal recent decline has once again resumed and extend weakness to 1.2100, however, loss of near term downward momentum should prevent sharp fall below 1.2070-75 and price should stay above 1.2050, risk from there is seen for a rebound later.