USD/CAD refreshes 10-month lows below 1.30 despite falling oil

Although the USD/CAD pair was able to record some modest recovery gains after the first drop below the 1.30 handle, it came under a renewed selling pressure and refreshed its lowest level since early September of 2016 at 1.2865. As of writing, the pair is trading just a couple of pips above that level, losing nearly 1% on the day.

The pair's bearish momentum remains unabated in the second half of the day as the greenback is having a difficult time finding a sustained demand after the mixed employment report from the United States. After quickly plummeting to a fresh session low of 95.53, the US Dollar Index rebounded to 95.93 in the next hour. However, it seems like the solid nonfarm payroll growth data by itself hadn't been enough to convince investors to continue to add to their long USD positions.

• US: Total nonfarm payroll employment increased by 222,000 in June

On the other hand, the loonie is finding some additional demand against its rivals on the back of better-than-expected unemployment and Ivey PMI data from Canada, countering the potential negative impact of falling crude oil prices. The unemployment rate in Canada eased to 6.5% in June from 6.6% in May and the Ivey PMI leaped to 61.6 from 53.8, both increasing the odds of a policy tightening move by the BoC.

• Canada: Ivey PMI for June stands at 61.6, indicating purchases were greater than previous month
• Canada: Employment rose by 45,000 in June, mostly in part-time work

In the meantime, crude oil prices remain volatile on Friday as investors are struggling to see how the recent increase in OPEC exports and an easing crude output will change the balance of the oil market. As of writing, the barrel of West Texas Intermediate is trading $44.40 and losing 2.5% on the day. 

• OPEC-led oil producer group not actively discussing further measures - Reuters

Technical outlook

Now with the critical 1.29 handle broker, the pair could aim for 1.2820 (Sept. 7 low), 1.2760 (Aug. 18 low) and 1.2700 (psychological level). However, the fact that the RSI on the daily graph dropped below the 30 mark to show oversold conditions suggests that the pair could attempt a recovery before the next leg down. On the upside, resistances align at 1.2985 (10-DMA), 1.3040 (Jun. 29 high) and 1.3120 (20-DMA).