Stays near weekly low below 1.3500 ahead of US/Canadian jobs data

• USD/CAD is retesting the weekly low on Friday and is being pressured by a combination of factors.
• Bets on a Fed rate cut weigh on the USD, while a rise in oil prices supports the Loonie.
• The downside remains muted ahead of monthly US and Canadian jobs data.

The USD/CAD pair is attracting sellers for the third day in a row and remains depressed below the psychological 1.3500 level or the weekly low until the start of the European session on Friday.

The sell bias in the US dollar (USD) remains firm on bets for a further interest rate cut by the Federal Reserve (Fed) in September. Apart from this, a rise in crude oil prices is seen supporting the commodity-linked Loonie and exerting downward pressure on the USD/CAD pair. The downside, however, appears limited as traders may opt to wait for the release of crucial monthly US and Canadian employment details later in the North American session.

From a technical perspective, the recent breakdown through the all-important 200-day simple moving average (SMA) was seen as a new trigger for bear traders. Furthermore, the oscillators on the daily chart have recovered from the oversold zone and are still deep in negative territory. This suggests that the path of least resistance for the USD/CAD pair is to the downside and supports the outlook for an extension of the slide from the 1.3565 area or near two-week high reached on Wednesday.

Traders, however, need to wait for some further selling below the 1.3485 region, or the weekly low, before positioning for further losses. The USD/CAD pair could then accelerate the slide towards the multi-month limit around the 1.3440 area reached last week, before finally falling to the March monthly low around the 1.3420 region. The downward trajectory could extend further towards the 1.3400 mark on the way to the next relevant support near the 1.3365-1.3360 zone.

On the other hand, the maximum overnight swing around the 1.3525 region could limit any recovery attempt before the 1.3565 area or the weekly peak. Further upside has the potential to lift the USD/CAD pair back towards the break point of the 200-day SMA support, now turned into resistance, currently pinned near the 1.3590 area. Sustained strength beyond the latter could cancel the short-term downside bias and trigger a short-covering rally towards the 1.3640-1.3645 resistance.

USD/CAD Daily Chart