USD/CAD drifts lower, approaching support at 1.3550 ahead of the US NFP

• The US Dollar pulls back ahead of the NFP report
• The uptick in Oil prices is providing support to the CAD.
• Longer term, the pair is in a corrective move after November’s sell-off.

The US Dollar is losing ground on Friday, calling an end to a 4-day rally as the loonie trims losses, favoured by higher Oil prices ahead of the US Nonfarm payrolls report.

The Dollar recovery lost steam on Thursday after the increase on last week’s Jobless Claims confirmed the softer US labour market anticipated by the JOLTs Job Openings and the ADP report and heightened speculation of Fed rate cuts in 2024.

In Canada, The BoC left rates on hold on Wednesday, keeping the doors open to further tightening although the comments about the cooling inflationary pressures have acted as a headwind for the CAD.

US Nonfarm Payrolls are likely to boost USD volatility

The main focus today is the US Nonfarm Payrolls, which are expected to show a moderate increase in employment and hourly wages. Investors will look at these figures with a special interest for confirmation that the Fed’s rate hikes have come to an end, which might boost volatility on US Dollar crosses.

The technical picture shows the pair is correcting higher, after a 3% sell-off in November. The next resistances are likely to be at the 4h 100SMA, at 1.3600, the November 30 high, 1.3622 and 1.3700.

Supports are 1.3520 and the December 4 low at 1.3475.

Technical levels to watch