USD/CAD tests 1.3300 as WTI retreats below $42

• USD/CAD is posting modest daily gains on Thursday.
• WTI is staging a technical correction, trades below $42.
• Risk-averse market environment helps the greenback find demand.

The USD/CAD pair fell to a daily low of 1.3240 in the early trading hours of the European session and staged a rebound in the last hours. As of writing, the pair was trading at 1.3299, gaining 0.26% on a daily basis.

On Wednesday, the selling pressure surrounding the greenback and crude oil’s impressive upsurge caused USD/CAD to push lower. After gaining nearly 2% on Wednesday, the barrel of West Texas Intermediate (WTI) is down 0.8% on the day at $41.85, not allowing the commodity-sensitive loonie to stay resilient against its rivals.

USD gathers strength ahead of Friday’s NFP report

On the other hand, the cautious market mood is helping the USD find demand. At the moment, the S&P 500 futures are down 0.33% on the day, suggesting that Wall Street’s main indexes are likely to open in the negative territory. If risk-off flows continue to dominate markets in the second half of the day, the US Dollar Index, which was last up 0.15% on the day at 92.95, could extend its rebound.

The US Department of Labor’s weekly Initial Jobless Claims will be the only data release from the US. On Friday, labour market reports from both Canada and the United States will be watched closely by market participants. 

Markets expect the Nonfarm Payrolls (NFP) in the US to increase by 1.6 million in July. On the flip side, Canada is expected to add 400,000 jobs with the Unemployment Rate edging lower to 11% from 12.3%.

Technical levels to watch for