• USD/CAD trades little changed as both the US Dollar and the Canadian Dollar face headwinds.
• Lower Oil prices weigh on the commodity-linked Canadian Dollar.
• Softer US Dollar limits the pair's upside despite stronger-than-expected US Jobless Claims.

USD/CAD trades around 1.4170 on Thursday at the time of writing, virtually unchanged on the day, as weakness in the US Dollar (USD) offsets the negative impact of lower Oil prices on the Canadian Dollar (CAD).

The Canadian Dollar remains under pressure as Crude Oil prices extend their corrective pullback after the recent geopolitical-driven rally. Although tensions in the Middle East remain elevated after the United States (US) and Iran exchanged military strikes for a second consecutive day, traders appear to be unwinding part of their recent bullish Oil positions, weighing on the commodity-linked Loonie.

Still, downside pressure on the Canadian currency remains limited by expectations that the Bank of Canada (BoC) could resume tightening later this year. The central bank left its policy rate unchanged at 2.25% in June, while swap markets now price roughly a 60% chance of a rate hike before year-end, up from around 40% earlier this week.

Scotiabank strategists Shaun Osborne and Eric Theoret said that "the CAD has performed relatively well through the overnight volatility," adding that negative sentiment toward the Canadian Dollar continues to moderate despite recent market swings.

Meanwhile, the US Dollar also weakens on Thursday, preventing USD/CAD from moving higher despite stronger-than-expected US labor market data. The US Department of Labor reported that Initial Jobless Claims declined to 215K in the week ending July 4, below the previous week's revised 217K reading and the market forecast of 218K. Continuing Jobless Claims edged up slightly to 1.814M.

The positive labor market data provides some support to the Greenback by reinforcing the view that the US economy remains resilient. However, the US Dollar continues to ease as investors remain focused on broader market sentiment and geopolitical developments, leaving USD/CAD trapped in a narrow range around 1.4170.