USD/CAD falls toward 1.3600 ahead of US employment data

• USD/CAD depreciates as softer US data raising speculations of the Fed reducing rates in 2024.
• The forecast for US Nonfarm Payrolls suggests an increase of 190,000 new jobs, down from the previous reading of 272,000.
• Lower WTI price may limit the upside of the commodity-linked Canadian Dollar.

USD/CAD extends its losing streak for the fourth successive session, trading around 1.3610 during the early European hours on Friday. This decline is attributed the weaker US Dollar (USD), which could be attributed to softer data from the United States (US) raising speculations of the Federal Reserve (Fed) reducing interest rates in 2024.

On Wednesday, US ISM Services PMI fell sharply to 48.8 in June, marking the steepest decline since April 2020. This figure was well below market expectations of 52.5, following a reading of 53.8 in May. The ADP Employment report showed that US private businesses added 150,000 workers to their payrolls in June, the lowest increase in five months. This figure fell short of the expected 160,000 and was below the downwardly revised 157,000 in May.

Traders await the US employment reports on Friday, which are expected to show a slowdown in employment growth in June. The US Nonfarm Payrolls (NFP) are expected to show an increase of 190,000 new jobs, down from the previous reading of 272,000. US Average Hourly Earnings are anticipated to moderate slightly, projected to decrease to 3.9% year-over-year from the prior 4.1% reading.

On the CAD's front, the modest decline in crude Oil price might limit the upside of the commodity-linked Canadian Dollar (CAD), as Canada is the major crude Oil exporter to the United States. West Texas Intermediate (WTI) Oil price trades around $83.50 per barrel at the time of writing.

Recent data showed that the Organization of Petroleum Exporting Countries (OPEC) increased production in June for the second consecutive month. This indicates a potential easing of tight Oil markets in the coming months, exerting downward pressure on crude Oil prices.

Additionally, the latest Canadian composite PMI of 47.5 signaled a contraction in private-sector output and a reduction in cost pressures, suggesting that the Bank of Canada (BoC) may lower borrowing costs. This could put pressure on the Canadian dollar and support the USD/CAD pair.

On Friday, traders await the Canadian Net Change in Employment, which is expected to drop to 22.5K in June, from the previous reading of 26.7K. Meanwhile, the Canadian Unemployment Rate is projected to tick higher to 6.3% from 6.2%.