With no major U.S. economic reports scheduled for release today, the focus is on Canada. Economists had been looking for an improvement in the labor market after an uptick in the employment component of the IVEY PMI release but unfortunately instead of creating jobs Canada lost 39.4k jobs in the month of July. This was the second consecutive month of job losses and also the second largest decline in job growth in more than 4 years. The unemployment rate also rose back to 7.2% from 7.1% and the participation rate declined to a 9 year low, a level that has been revisited a few times in the past year. Losses in both full and part time work also reflect broad based weakness in the labor market. The gradual recovery in the U.S. economy was supposed to support growth in Canada but persistent trade deficits have restrained economic performance. As a result, the surprise decline in jobs sent the Canadian dollar plunging against the U.S. dollar. While USD/CAD is still trapped in a broad 1.0250 – 1.0600 range, we feel that the latest disappointment in data could bring the currency pair backup to its August highs.

Meanwhile the U.S. dollar is trading higher against all of the European currencies and lower against the Japanese Yen and comm dollars. The focus will shift back to the U.S. next week with retail sales and consumer confidence scheduled for release. The level of consumer spending will play a role on how quickly the Federal Reserve plans to taper. The Australian dollar continues to be the biggest mover today with solid Chinese industrial production numbers driving the currency pair to fresh month to date highs. The upside surprises in Chinese data also squeezed out some of the AUD/USD short positions that have built up in the recent months. Resistance for the pair comes in at the July highs of 0.9320.