USD/CAD drops toward 1.3100 despite strong NFP data

• NFP in January increase by 304K to beat the expectation of 165K.
• US Dollar Index quickly erases the initial spike.
• WTI jumps above $54 to support the loonie.

After rising to 1.3140 with the knee-jerk reaction to the January NFP report from the U.S., the USD/CAD pair quickly reversed its direction and slumped to its lowest level since early November at 1.3106. As of writing, the pair was trading at 1.3110, losing 0.22% on a daily basis.

The U.S. Bureau of Labor Statistics on Friday reported that nonfarm payrolls increased by 304,000 to beat the market expectation of 165,000 by a wide margin. However, the fact that December's reading got revised down to 222K from 312K and the unemployment rate ticked up to 4% didn't allow the greenback to take advantage of the strong January figure. Following an upsurge to 95.60, the US Dollar Index erased its gains. At the moment, the DXY is down 0.11% on the day at 95.45.

On the other hand, with OPEC reporting its lowest barrel-per-day output in two years in January, crude oil prices gained traction with the barrel of West Texas Intermediate rising above $54 and helping the commodity-related loonie gather strength against its peers.

Later in the session, the IHS Markit will be publishing Manufacturing PMI data from both the United States and Canada. The UoM is also scheduled to release its consumer confidence report.

Technical levels to consider