USD/CAD slides to fresh multi-week low, eyes 1.3400 mark ahead of US NFP report

• USD/CAD continues losing ground for the third straight day and drops to a nearly three-week low.
• A further recovery in Oil prices underpins the Loonie and exerts pressure amid a weaker Greenback.
• Reduced bets for another 25 bps Fed rate hike in June weigh on the USD ahead of the NFP report.

The USD/CAD pair drifts lower for the third successive day on Friday - also marking the fifth day of a negative move in the previous six - and drops to a two-and-half-week low during the early part of the European session. The pair currently trades around the 1.3420-1.3415 region, down over 0.20% for the day, and is pressured by a combination of factors.

Crude Oil prices add to the overnight strong recovery gains and rally another 1% on the last day of the week, which, in turn, is seen underpinning the commodity-linked Loonie. The US Dollar (USD), on the other hand, remains depressed amid expectations that the Federal Reserve (Fed) will likely skip an interest rate hike at its meeting later this month and further contributes to the offered tone surrounding the USD/CAD pair.

In fact, Philadelphia Fed President Patrick Harker reiterated on Thursday that it’s time to at least hit the stop button for one meeting and see how it goes. This, along with the recent comments by several influential FOMC officials, forced investors to scale back their bets for another 25 bps lift-off in June. This led to a further decline in the US Treasury bond yields on Thursday and continues to weigh on the Greenback.

Furthermore, the passage of legislation to lift the US government's $31.4 trillion debt ceiling and avert an unprecedented American default boosts investors' confidence. The optimism remains supportive of a generally positive risk tone around the equity markets and turns out to be another factor weighing on the safe-haven Greenback. This, in turn, supports prospects for a further intraday downfall for the USD/CAD pair.

Traders, however, might refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the release of the closely-watched US monthly employment details, due later during the early North American session. The popularly known NFP report will play a key role in driving the USD demand, which, along with Oil price dynamics, should allow traders to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch