USD/CAD climbed sharply on Friday, trading around 1.3850 after gaining nearly 80 pips as simultaneous employment reports from the United States and Canada delivered contrasting signals for the two currencies. The pair was up approximately 0.39% on the day as the US Dollar benefited from stronger-than-expected labor-market data.

US Nonfarm Payrolls (NFP) increased by 162,000 in August, according to the Bureau of Labor Statistics (BLS), far exceeding market expectations for a 56,000 rise. The result followed a revised 21,000 increase in July, reinforcing evidence that employment conditions remain more resilient than previously estimated.

Previous payroll figures were also revised higher. June job growth was upgraded to 31,000 from 20,000, while July was revised from an initially reported 23,000 decline to a 21,000 increase. Combined employment gains for June and July were therefore 55,000 stronger than previously reported.

Other elements of the US report were less robust. The unemployment rate held steady at 4.1%, matching expectations, while labor-force participation edged higher to 61.6% from 61.4%. Annual wage growth also moderated, with Average Hourly Earnings increasing 3.1% in August compared with 3.2% in July.

Despite the softer wage growth, the substantial payrolls beat provided a clear boost to the US Dollar by reducing concerns about a sharp deterioration in the American labor market.

Canada delivered a considerably weaker employment picture. The Canadian economy shed 41,700 jobs in August after adding 75,100 positions in July, sharply missing expectations for a 15,000 increase. The unemployment rate remained at 6.4%, as anticipated.

Canadian wage growth also weakened considerably, with annual Average Hourly Earnings rising just 2% in August versus 3% previously. The combination of unexpected job losses, stagnant unemployment and slower wage growth undermines the Canadian Dollar and reinforces the upward momentum in USD/CAD.

Trade idea:

USD/CAD holds a bullish bias above 1.3800; a break through 1.3870 could target 1.3920, while a move below 1.3800 may expose 1.3750.