USD/CAD retraces losses as oil turns negative on the day

After recording some moderate recovery gains in the Asian session, the USD/CAD pair spent the majority of the day moving sideways near the 1.26 handle before coming under a selling pressure in the NA session. Having recorded a session low at 1.2550, the pair is now trading at 1.2573, up 0.02% on the day.

Although today's macro data from the U.S. came in mixed, the greenback failed to stay in the positive area as investors focused on the worse-than-expected readings and refrained from taking large USD positions ahead of tomorrow's NFP report. The ISM's PMI report on Thursday showed that the economic activity in the non-manufacturing sector in the U.S. grew at a slower pace in July as the headline number eased to 53.9 from 57.4. Moreover, the employment sub-index dropped by 2 points, signaling towards a disappointing employment report on Friday.

• US: Strengthening employment conditions - HSBC

Despite the continuous selling pressure on the USD, the pair is not having a tough time finding support as the commodity-linked loonie is struggling to gather strength amid crude oil weakness. After testing the critical $50 handle during the first half of the session, the barrel of West Texas Intermediate turned negative in the last hour and is now trading at $49.40, losing 0.25% on the day.

On Friday, investors will watch the employment data from both the U.S. and Canada. Canada's robust economic growth in the second quarter of 2017 could make way for a strong reading tomorrow and push the pair lower towards the end of the week.

Technical outlook

After recording modest gains in the first three days of the week, the USD/CAD is looking to close the day little changed after today's fluctuation. Short-term indicators for the pair show neutral conditions and the pair could continue moving sideways ahead of tomorrow's important data. 1.2650 (Jul. 19 high) could be seen as the initial hurdle ahead of 1.2700 (psychological level/Jul. 17 high) and 1.2770 (Jul. 13 high). On the downside, supports are located at 1.2550 (daily low), 1.2500/05 (psychological level/10-DMA) and 1.2450 (Aug. 1 low).

Today's data from the U.S.

• US: Weekly initial claims was 240,000, a decrease of 5,000 from previous week
• US: Services Business Activity Index registered 54.7 in July, up from 54.2 in June - Markit
• US: Composite PMI Output Index rose to 54.6 in July, up from 53.9 in June
• US: Economic activity in non-manufacturing sector grew in July - ISM
• US: New orders for manufactured goods in June increased 3% to $481.1 bln