• Unemployment Rate in Canada dropped to 5.6% in December. 
• Nonfarm Payrolls in US rose less than expected in December.
• Falling crude oil prices limit commodity-sensitive CAD's gains.

The USD/CAD pair lost nearly 50 pips in a matter of minutes with the initial market reaction to the labour market data from the US and Canada. After touching a daily low of 1.3027, however, the pair started to erase its losses and was last seen trading at 1.3045, losing 0.07% on the day.

CAD capitalizes on falling Unemployment Rate

Statistics Canada reported that the Unemployment Rate in Canada fell to 5.6% in December from 5.9% and came in better than the market expectation of 5.8% to help the CAD gather strength. On the other hand, Nonfarm Payrolls in the US increased by 145,000 in December to fall short of the market expectation of 164,000. In addition, the wage annual inflation, as measured by the Average Hourly Earnings, edged lower to 2.9% from 3.1%.

The US Dollar Index lost its traction and erased its daily gains after the dismal data and is now flat on the day near 97.40.

Despite the strong Canada data and USD weakness, falling crude oil prices make it difficult for the commodity-sensitive loonie to preserve its strength. At the moment, the barrel of West Texas Intermediate (WTI) is down 0.5% on the day at $59.30.

Technical levels to watch for