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Employment Momentum <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Powers CAD

Canadian dollar strength followed through the weekend and into the session, subsequent to the impressive employment figures released at the end of last week.  The jump in employment has now raised the possibility of the Bank of Canada Governor David Dodge reconsidering a potential rate hike as the labor market continues to remain tight with little slack to afford the monetary policy committee.  The lack of slack is additionally likely to spur inflationary speculation as wages and labor costs are surely to rise in the near term.  Ultimately, this has pushed the single currency higher against the dollar with cross buying, especially against the Euro and Yen, contributing to the majors rise.  Notably, the pair now hovers the last line of defense at 1.0930, the May 31 low, before contemplating the multi decade low from the end of 1977.  Eyeing 1.0900, market participants are recognizing rumors of key options barriers with plenty of protective bidding likely in the days to come.  Separately, significant bidding in CADJPY crosses contributed to the majors slide, hitting the highest levels since early 1990s.

Rumormill

Buying interest looks to emerge at the 1.0975 figure and below in purporting the major option defense at 1.0900.  Further bidding looks to be sparked at the 1.0930 and 1.0910 figures with plenty of selling comparatively up top at the 1.1000 and 1.1025 levels.

EURCAD

Pessimism Over Euro Bolsters Cross Downside

The EURCAD cross moved higher in the North American session following the Canadian majors lead as Canadian employment figures continued to purport further monetary policy  tightening in the worlds ninth largest economy.  The demand for loonie overshadowed a rise in the Euro leg in composing the synthetic even as commentary on the day was Euro bearish.  According to Quaden, Governor of Belgiums national bank, the current recovery remains feeble when compared to the global rebound currently taking place.  Coupled with the dovish comments following last weeks interest rate decision and traders and now converting to a tamer tone overall, expecting no further rate hikes till later in the year if any.  Against the prospect of rising benchmark rates in Canada, traders pounded the Euro ahead of tomorrows ZEW survey.  Although the economic sentiment is expected to pull back slightly, strength remains in the current assessment, lending to a near term bullish bias.

Rumormill

Emerging selling pressure in the Euro leg looks to keep the cross on the offer as we head into the Asian session.  Although bids are located in the 1.2550 figure and slightly lower at 1.2535, heavy selling looks to crimp any upward momentum at 1.2640, 1.2650 and 1.2675.  Stops are above slightly at 1.2710.

Technically Speaking

Much like action in the USDCAD, the EURCAD shattered the 50.0 fibo of its 1.3493-1.4455 uptrend at 1.3975 to test further support at 1.3860. The neckline of a classic head and shoulders pattern, a confirmed break below this level would give a clear signal of a continued downtrend. As such, a continued break would likely test the 5-year low of 1.3493, while an unlikely rebound would encounter formidable resistance at psychologically significant 1.4200.   

AUDCAD

Aussie Lower On Dipping Commodities

Aussie major pessimism was reflected in the AUDCAD cross pair as well throughout the New York session.  Opening near the session lows, the commodity bloc component came under severe selling pressure following the slight pull back in gold contracts on the New York Mercantile Exchange, falling over $3 at the market open.  The pair subsequently fell to the lowest levels since early 2002 with selling pressure continuing to hover over key figures in the major.  Adding to the Aussies woes was a survey released by Manpower indicating that 73 percent of regional businesses do not expect to increase staff numbers in the coming quarter.  Suggestive of near term employment slowdown, the report contrasts to extreme 30-year lows in the labor market, witnessed last week.  With that said, market participants will be eyeing the NAB business survey for May as it stands in a thin economic schedule.

Technically Speaking

After the days plunge saw it establish a new 4-year low of 0.8185, the AUDCAD settled to hold support at 0.8200 by the New York close. A rebound in the stochastics on 1-hour chart suggests that a small bounce may be imminent, but a true rebound would need to break Fridays high of 0.8379 for confirmation. Otherwise, a break below the 78.6 fibo of the 4/01-2/04 uptrend at 0.8150 could see the pair flirt with the stiff support at 0.8000.