Employment changes in Canada. Impact of the news on the USDCAD currency pair
Employment is an indicator of the well-being of a country's economy, its good
investment climate and the health of the economy as a whole.
Fundamental financial analysis should always take into account employment data, as it also affects the value of the Canadian dollar.
In fact, the logic for a trader and investor when releasing this indicator should be very simple.
The more people are employed, the less unemployment benefits need to be paid, and as a result, the burden on the country's main budget decreases.
Also, do not forget that the greater the number of people employed, the greater the percentage of taxes the state will collect, which directly leads to strengthening the economy, increasing social standards and the development of the state in various sectors.
The Canadian Employment Change is a monthly measure of the number of people employed in Canada and has a strong impact on the CAD exchange rate at the time the news is released and for some time thereafter. Many note that at the time the news is released there is a strong increase in volatility , which makes it very difficult to work with it.
Actually, everyone knows that the release of employment data promptly reacts to the movement of the chart with the Canadian dollar, but I have not found more detailed information about how the price behaves at the time the indicator is released and after.
To study the influence of the indicator on price movement, I took one of the most popular instruments in which CAD is present - the Dollar/Canadian currency pair. The pair has a low spread with almost any broker, so it is most often chosen if you need to work with CAD.
I am very interested in how long on average the price moves after the news is released, what effect the indicator has on the market over time and the general behavior of the price. The last four months for which news was published were selected for the study.
On June 5, 2015, positive data on employment in Canada was released, and if the previous value was -19.7K, then in fact we received 58.9K. This tells us about an increase in employment, which in turn should lead to a strengthening of the Canadian economy. On the chart of the Dollar/Canadian currency pair, this should result in a fall in the chart, as the dollar weakens against the backdrop of good news for the Canadian. You can see the actual price behavior below:
Judging by the chart, there is an interesting spike in price at the time the news was released, and the price went in the opposite direction. Then, an hour later, the price began to actively move towards the positive employment data released and passed 80 points.
It is worth noting that the price surge that you can observe was caused by large players who specifically pushed the price towards the stop orders of traders who were selling. If you had a small stop loss , you would be knocked out of the market.
On July 10, 2015, rather contradictory data came out. Experts predicted a decrease in the employed population to -10K, but in the end they received -6.4K. Many perceived this as good news, but in fact there was a drop in employment from the previous value of 58.9K to -6.4K, which should immediately be reflected in the form of growth in the chart of the USDCAD currency pair. You can see the real price behavior in the picture below:
Judging by the chart, the price immediately reacted to the news and covered a distance of 80 points. It is worth noting that the effect of the news lasted 1 hour and 15 minutes, after which the price began to roll back in large waves and practically returned to its original positions.
On 08/07/2015, most analysts predicted an increase in the employment level and highlighted the level of 5.0K versus the previous -6.4K. In fact, the news came out with a value of 6.6K, which tells us about an increase in the number of employed people, and as a result, a fall in the chart of the Dollar/Canadian currency pair. We see the price reaction to the event in the figure below:
On the chart you can see that after the news was released, the price moved in the opposite direction by about 25 points, and then 20 minutes later it worked perfectly, taking 100 points of profit. The news affected the market for 2 hours and 15 minutes.
On September 4, 2015, quite positive data came out, so most traders expected a strong drop in the chart of the Dollar/Canadian currency pair, but you can see the real picture in the picture below:
On the chart, you can see that after the release of employment data, a gap formed between the candles, with the size of the next open candle being 53 points. Regarding the effect of the news, we can say that it was effective only for five minutes at the time of publication, which simply would not have given you the opportunity to earn money after the first surge. But, despite this, the price passed 53 points, which indicates the strength of the news.
Now let's draw a line. Based on the historical examples considered, we can conclude that large players are speculating very heavily on this news, initially pushing the price against the market. It is also worth noting that for four positions using a stop order of 60 points, and a profit of 80, you could earn: 80+80+80-60= 180 points of profit.
You should also understand that the news is highly volatile, so you need to choose a broker with a high speed of order execution and direct access to the market in the form of an ECN account .