- A combination of factors dragged USD/CAD lower for the second straight session on Thursday.
- An uptick in oil prices underpinned the loonie and exerted some pressure amid weaker USD.
- Slightly overstretched conditions might help limit any deeper losses, at least for the time being.
The USD/CAD pair remained depressed through the early European session and dropped to the lowest level since February 2018, around mid-1.2200s in the last hour.
The pair failed to capitalize on its early uptick, instead met with some fresh supply near the 1.2285-90 region and turned lower for the second consecutive session on Thursday. The downtick was sponsored by the emergence of some fresh selling around the US dollar, weighed down by Wednesday's unimpressive US macro releases.
The ADP report showed that the private-sector employers in the US added 742K jobs in April. The reading, however, was well below consensus estimates. Adding to this, the US ISM Services PMI also fell short of market expectations and dropped to 62.7 in April from a record high level of 63.7 touched in the previous month.
The data reaffirmed market expectations that the Fed will keep interest rates low for a longer period. This, along with a softer tone surrounding the US Treasury bond yields and the underlying bullish sentiment in the financial market, acted as a headwind for the safe-haven USD and exerted pressure on the USD/CAD pair.
Apart from this, a modest pickup in crude oil prices underpinned the commodity-linked loonie and further contributed to the USD/CAD pair's intraday slide of around 35-40 pips. That said, slightly overstretched conditions might help limit any further losses ahead of Friday's key monthly jobs report from the US and Canada.
In the meantime, Thursday's US economic docket – featuring the release of the usual Initial Weekly Jobless Claims data – will be looked upon for some impetus. This, along with the US bond yields and the broader market risk sentiment, might influence the USD. Traders might further take cues from oil price dynamics for some short-term opportunities around the USD/CAD pair.
