Friday's Canada jobs report for the month of January could drag the USD/CAD pair down if data surprise to the upside, economists at Bank of America Global Research report.

CAD/USD  has had a strong positive correlation with Canada employment data surprises

“We find over the past two years, the CAD/USD exchange rate has had a strong positive correlation with Canada employment data surprises.”

“Our economists and consensus forecast both look for Canada to add 15K employment for Jan 2023. The risk may be to the upside, given two recent large surprises for Oct and Dec 2022, respectively leading to immediate 0.57% and 0.72% CAD/USD rallies in the two hours after the data release.”

“In the event that CA employment data indeed surprises to the upside this Friday, we would expect some tailwind for CAD and for USD/CAD to fall below the 1.34-handle.”

See – Canadian Employment Preview: Forecasts from five major banks, little if any gain