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  • USD/CAD struggles to gain any meaningful traction amid the prevalent USD selling bias.
  • Bullish crude oil prices underpin the loonie and contribute to capping gains for the pair.
  • Traders now seem reluctant ahead of the monthly jobs report from the US and Canada.

The USD/CAD pair struggles to capitalize on the previous day's modest bounce from sub-1.3400 levels and oscillates in a narrow trading band through the Asian session on Friday. The upside remains capped amid the underlying bearish sentiment surrounding the US Dollar, which struggles near its lowest level since August amid dovish signals from the US central bank. In fact, Fed Chair Jerome Powell sent a clear message on Wednesday that the US central bank will soften its stance and said that it was time to slow the pace of interest rate hikes. Apart from this, signs of easing inflationary pressure and sluggish US Treasury bond yields continue to weigh on the greenback.

The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index decelerated to 6% YoY in October from 6.3% previous. Adding to this, the annual Core PCE Price Index, the Fed's preferred gauge of inflation, edged down to 5% from 5.2% as expected. The softer data dragged the yield on the benchmark 10-year US government to a nearly two-month low. Apart from this, the recent strong recovery in crude oil prices from the YTD low underpins the commodity-linked Loonie and contributes to keeping a lid on the USD/CAD pair, at least for now.

Traders also seem reluctant to place aggressive bets ahead of the closely-watched US monthly employment details. The popularly known NFP will play a key role in influencing the near-term USD price dynamics ahead of the crucial FOMC meeting on December 13-14. Apart from this, traders will further take cues from Canadian jobs data and oil price dynamics to grab short-term opportunities around the USD/CAD pair. Nevertheless, the fundamental backdrop seems tilted in favour of the USD bears and suggests that the path of least resistance for the major is to the downside.

Technical Outlook

From a technical perspective, the overnight swing high, around the 1.3470 area, might act as immediate resistance ahead of the 1.3500 psychological mark. A sustained strength beyond could lift the USD/CAD pair towards the 1.3575-1.3580 hurdle en route to the 1.3600 round figure. The momentum could further get extended to a multi-week high, around the 1.3645 zone touched on Tuesday.

On the flip side, weakness below the 1.3400 mark is likely to find support near an ascending trend-line extending from November low, currently around the 1.3380 region. A convincing break below will expose the crucial 100-day SMA, near the 1.3300-1.3290 area. Some follow-through selling will be seen as a fresh trigger for bearish traders and set the stage for an extension of the recent decline from a 29-month peak touched in October.

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