USD/CAD drops below 1.30 on disappointing NFP report

• Nonfarm payrolls in the U.S. increased 157K in July.
• US Dollar Index tries to hold above 95.
• Canadian trade deficit shrinks more than expected.

After spiking up to a session high at 1.3025 with the initial reaction to the July employment report from the United States, the USD/CAD quickly reversed its gains and fell to a 1.2980. As of writing, the pair was trading at 1.2993, losing 0.23% on the day.

The  U.S. Bureau of Labor Statistics announced that the total nonfarm payroll employment rose by 157,000 in July to miss the market expectation of 190,000. On the other hand, the unemployment rate ticked down to 3.9% while the average hourly earnings came in at 2.7% on a yearly basis, both data matching the analysts’ estimates. On a positive note, June reading got revised up to 248,000 from 213,000. The US Dollar Index, which advanced to a two-week high at 95.37 earlier today, was last seen down 0.1% at 95.08.

On the other hand, the loonie received an additional boost from the upbeat trade figures from Canada. Supported by a 4.1% increase in exports, Canadian international trade deficit fell to its lowest level since January at  $626 million in June.

Later in the session, Markit and ISM will be publishing their respective PMI figures for the U.S. service sector.  

Technical outlook

The initial support for the pair aligns at 1.2980 (daily low/100-DMA), ahead of 1.2920 (Jun. 8 low) and 1.2855 (Jun. 6 low). On the upside, resistances could be seen at 1.3000 (psychological level), 1.3075 (Jul. 30 high) and 1.3135 (50-DMA).