- During the trading session on Friday, we have seen the Canada 60 (S&P/TSX 60 Index) pull back just a bit as Canadians came to grips with the idea that employment in that country continues to expand, perhaps growing some confusion into where the bank of Canada will have to line up.
- The employment change was in addition of 76,000 jobs last month, which had been forecasted for 25,500 at it.
- Furthermore, the Unemployment Rate in Canada came out at 6.6%, instead of the expected 6.8% for the month.
Because of all this, traders will begin to wonder whether or not the bank of Canada is going to remain as supportive. While one data point is not enough to change the entire complexity of what the central bank is dealing with, the reality is that the TSX has been rallying quite significantly as the central bank has continued to cut rates until recently. While I do believe that the bank of Canada will continue to show dovish behavior, the reality is that if employment gets to be a little too hot, Canada will have to sit still as far as the interest rates are concerned.
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Tariffs and commodities
When you trade the Canada 60, you need to be aware of the fact that huge portions of it are based on commodities, as well as financials. In that sense, it’s very much like the ASX 200, or what you might know as the “Australia 200.” Think of money and materials.
The potential tariff war with the United States seems to be settling down, and if that’s the case it could very well help this index. It’s obvious to me that the cooperation between the United States and Canada is crucial for the Canadian economy, as not only do 85% of their exports end up in the United States, for that matter 80% of the country lives within an hour of the border. At this point in time, I’m keeping an eye on the C$1550 level, because if we can break above there, I believe that we will get another leg higher. If we fall from here, there seems to be a ton of support near the C$1450 level, but I would also anticipate that short-term support can be found near C$1500.
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