• Positive risk sentiment, Canadian trade data and crude oil prices favor the loonie.
• USD/CAD rejected again from above 1.3050.
• US and Canadian employment reports are due on Friday.  

The USD/CAD dropped further during the American session and printed a fresh daily low at 1.2960. An improvement in risk sentiment weighed on the pair ahead of the key economic data.

Markets recovers, dollar retreats

Data released in Canada showed an unexpected sharp widening in the trade surplus that helped the loonie. Also, higher equity prices contribute to weakening the dollar. The Dow Jones is up by 0.85% and the S&P 500 gains 1.19%. Commodity prices are also higher. Crude oil prices are up by more than 5%, adding to CAD strength.

Traders will continue to look at market sentiment as a key driver in USD/CAD’s price action. On Friday, economic data will also play a critical role. Employment numbers are due in both, Canada and the US.

Another failure above 1.3000

The USD/CAD once again was rejected from above 1.3050 like what happened in May and June. The ongoing correction below 1.2960 could extend to the 20-day Simple Moving Average at 1.2930.

On the upside, the dollar faces immediate resistance at 1.3015, followed by 1.3045. A daily close well above 1.3050 should open the doors to more gains.