Forex Trading Guide: Canadian Jobs Report (September)

If you’re looking for an opportunity to trade the news apart from all the central bank events this week, then you’re in luck because Canada will be printing its September jobs report on Friday’s U.S. trading session. Here’s my Forex Trading Guide for this release.

What is this report all about?

Forex traders typically pay close attention to jobs releases because these serve as leading indicators for future economic growth. After all, a stable employment situation inspires better financial confidence, which then supports consumer spending. In turn, this leads businesses to step up production in order to keep up with rising demand, spurring positive momentum for hiring and overall growth.

Canada’s jobs report comes with two main components: the employment change figure and the unemployment rate. The former is considered a measure of job creation since it indicates the change in number of employed folks over the previous month while the latter accounts for the percentage of the total work force that is unemployed and actively seeking employment.

What happened last time?

The Canadian jobs report for August printed mixed results, as the employment change showed a 12,000 increase in hiring instead of the projected 4,800 decline while the jobless rate surprisingly ticked up from 6.8% to 7.0%.

Looking at the components of the jobs report reveals that the services sector ramped up their hiring activity, which was more than enough to make up for the drop in employment in the utilities, construction, and manufacturing industries. To top it off, full-time positions jumped by 54,000 and the total number of hours worked increased by 0.8% during the month, reflecting improvements in the quality of jobs and productivity. This explains the increase in the jobless rate, as the positive labor market developments actually encouraged more Canadians to return to the labor force and resume their job hunt.

What’s expected for the upcoming release?

For the month of September, the Canadian labor market is expected to keep up its progress by showing a 10,500 rise in employment, which might be enough to bring the jobless rate down from 7.0% to 6.9%.

Forex analysts might be bracing themselves for another upbeat Canadian jobs report, as the economy has actually been churning out better than expected results in the past three releases. Besides, the folks who resumed their job hunt back in August may have been hired already, contributing additional full-time or part-time positions for September’s employment change reading.

How might the Loonie react?

USD/CAD’s forex reaction to the Canadian jobs report is usually fast and furious, as this report is typically released at the same time as the U.S. non-farm payrolls report, which is notorious for hogging the forex spotlight.

USD/CAD 15-min Forex Chart (Sept 4, 2015)

USD/CAD 15-min Forex Chart (Sept 4, 2015)

As you can see from the pair’s intraday forex chart during the previous release, Loonie bulls had barely been able to gain traction before giving in to U.S. dollar strength. In my previous Forex Trading Guide for Canada’s jobs report, USD/CAD had a similar quick reaction as a tug-o-war between the Loonie and Greenback ensued.

This time, however, Canada won’t be sharing the stage with any other top-tier release so USD/CAD might be in for a larger move. Then again, Uncle Sam is set to print the latest import prices data while FOMC members Lockhart and Evans will be giving testimonies, which means that Greenback price action might still steal the show.

If you’re looking for other opportunities to trade the Loonie during this release, you might be better off trading the crosses instead. In fact, Happy Pip is watching the CAD/JPY range closely, ready to hop in on either a bounce or a break. Do you think we’ll see another upside surprise?