USD/CAD falls to near 1.3500 ahead of employment data from both nations

• USD/CAD loses ground due to dovish comments from the Fed officials.
• Fed’s Austan Goolsbee said that the longer-run trend of the labor market and inflation data justify the Fed easing soon.
• The upside of the commodity-linked Canadian Dollar could be restrained due to lower Oil prices.

USD/CAD continues to lose ground for the third successive day, trading around 1.3500 during the Asian session on Friday. Traders are likely to await Friday's release of employment data from the United States (US) and Canada. The US Nonfarm Payrolls (NFP) will be in the spotlight as it may offer further insights on the potential size of an anticipated rate cut by the Federal Reserve (Fed) this month.

The US Dollar (USD) faces challenges following the dovish comments from Federal Reserve (Fed) officials. Chicago Fed President Austan Goolsbee said on Friday that the longer-run trend of the labor market and inflation data justify the Fed easing interest-rate policy soon and then steadily over the next year. FXStreet’s FedTracker, which gauges the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Goolsbee’s words as neutral with a score of 3.8.

Additionally, San Francisco Federal Reserve President Mary Daly stated on Wednesday that "the Fed needs to cut the policy rate as inflation is declining and the economy is slowing." Regarding the size of the potential rate cut in September, Daly noted, "We don't know yet." Atlanta Federal Reserve President Raphael Bostic said that the Fed is in a favorable position but added that they must not maintain a restrictive policy stance for too long, per Reuters.

The upside potential of the commodity-linked Canadian Dollar (CAD) could be limited by falling crude Oil prices, especially given Canada's position as the largest Oil exporter to the United States. West Texas Intermediate (WTI) trades around $68.70 at the time of writing, marking a fresh 2024 low amid concerns over demand in both the US and China. However, a delay in OPEC+ Oil output increases and a significant drawdown in crude oil inventories may help cushion WTI’s losses.

In Canada, the Net Change in Employment for August is expected to show an increase of 26.5K new jobs, recovering from the previous decline of 2.8K. However, the Unemployment Rate is projected to rise slightly to 6.5%, compared to the previous reading of 6.4%.