USD/CAD struggles near 2-week lows, around mid-1.3400s ahead of NFP

   “¢   On offers for the third consecutive session amid the prevalent USD selling bias.
   “¢    A strong follow-through move in oil underpinned Loonie and adds to pressure.
   “¢   Investors now eye the keenly watched US monthly jobs report for fresh impetus.

The USD/CAD pair dropped to two-week lows, below mid-1.3400s, during the early European session but has managed to recover few pips thereafter.  

After repeated failed attempts to make it through the 1.3660-65 supply zone, a combination of factors prompted some aggressive long-unwinding trade and led to a sharp intraday fall of over 180-pips on Thursday.

The US Dollar failed to capitalize on Thursday’s early up-move, supported by haven-fueled buying interest, and reacted negatively to dovish comments by Dallas Fed President Robert Kaplan/falling US Treasury bond yields.

The selling pressure aggravated further amid a sharp short-covering rally in crude oil prices, which tend to underpin demand for the commodity-linked currency – Loonie, and the disappointing release of US ISM manufacturing PMI.

A strong follow-through up-move in oil prices, coupled with a softer tone surrounding the greenback, despite a goodish pickup in the US bond yields, kept exerting some downward pressure for the third consecutive session.  

Further downside, however, remained limited, at least for the time being, as traders seemed reluctant to place aggressive bets ahead of today’s important release of the keenly watched US monthly jobs report (NFP).

The economy is expected to have added 177k new jobs in December, holding the unemployment rate steady at 3.7%. Market participants, however, will take cues from wage growth data, foreseen to post another month of solid growth.

Technical levels to watch

A follow-through selling has the potential to continue dragging the pair further towards challenging the 1.3400 handle, below which the pair is likely to accelerate the fall towards the 1.3345-40 horizontal support. On the flip side, the 1.3490-1.3500 region now becomes an immediate strong hurdle, which if cleared might trigger a short-covering bounce back towards the 1.3565-70 region en-route the 1.3600 round figure mark.