USD/CAD rebound from session lows, clings to small gains below 1.3600

• USD/CAD pair is trading in a tight channel ahead of critical data.
• US Dollar Index slumped below 97.00 amid risk-on flows.
• Nonfarm Payrolls is expected to come in at +3 million in June.

After climbing above 1.3600 in the late Asian session, the USD/CAD pair lost its traction and dropped to 1.3573 during the European trading hours. Nevertheless, USD/CAD staged a modest rebound and was last seen gaining 0.04% on the day at 1.3590.

The upbeat market mood, as reflected by the sharp upsurge witnessed in major European equity indexes, is making it difficult for the greenback to find demand on Wednesday. The US Dollar Index, which climbed to its highest level in nearly a month at 97.80 on Tuesday, is now at fresh weekly lows at 96.97.

Eyes on US NFP data

In the second half of the day, the US Bureau of Labor Statistics will release its highly-anticipated Nonfarm Payrolls (NFP) report. Markets expect the NFP to come in at +3 million in June and see the Unemployment Rate falling to 12.3% from 13.3% in May.

Previewing the data, “payrolls probably rose strongly again in June. We estimate up 4.0 million, following a 2.5 million gain in May," TD Securities analysts said. "Despite the expected strength in payrolls, we expect the unemployment rate to remain around where it was in May at 13.3%.” 

On the other hand, crude oil prices are also capitalizing on the positive market environment. With the barrel of West Texas Intermediate (WTI) rising nearly 1% on the day at $40.08, the CAD stays strong against its peers and caps USD/CAD's upside. Meanwhile, the Canadian economic docket will feature International Merchandise Trade data for May.

Technical levels to watch for