- USD/CAD witnessed heavy selling on Friday and slipped below the 1.2600 mark in the last hour.
- Rallying oil prices underpinned the loonie and exerted pressure amid renewed USD weakness.
- A larger-than-expected fall in the Canadian unemployment rate accelerated the intraday downfall.
The USD/CAD pair weakened further below the 1.2600 mark during the early North American session and dropped to fresh three-day lows post-US/Canadian macro data.
A combination of factors exerted some downward pressure for the second successive day and dragged the USD/CAD pair further away from the post-BoC swing highs, around the 1.2760-65 area. A strong pickup in crude oil prices underpinned the commodity-linked loonie. This, along with a modest US dollar weakness, contributed to the offered tone surrounding the major.
The USD bulls failed to gain any respite from a strong rally in the US Treasury bond yields and even shrugged off the hotter-than-expected Producer Price Index (PPI). In fact, the headline PPI rose 0.7% MoM in August and 8.8% on yearly basis. Excluding food and energy, core PPI climbed 0.6% during the reported month and 6.7% YoY during the reported month.
On the other hand, the Canadian dollar got a minor lift in reaction to a larger-than-anticipated drop in the unemployment rate, to 7.1% in August from 7.5% previous. This, to a larger extent, helped offset a slight disappointment from Employment Change figures, which showed that the number of employed people rose 90.2K in August as against 100K anticipated.
With the latest leg down, the USD/CAD pair now seems to have confirmed a bearish break below the 1.2610-1.2600 support zone. Hence, a subsequent slide back towards challenging the very important 200-day SMA, around the 1.2525 region, looks a distinct possibility. That said, expectations for an imminent Fed taper announcement might help limit further losses.
