The U.S. dollar drifted lower against its major counterparts in the European session on Thursday, after reports that the U.S. and Canada are unlikely to reach an agreement on NAFTA this week.

Odds of reaching a deal look unlikely this week, as the countries have not resolved issues on dairy and dispute panels.

Canadian Prime Minister Justin Trudeau said on Wednesday that there should be a certain amount of flexibility from the United States if the two sides are to reach a deal on renewing NAFTA, which Washington wants to be finished by the end of the month.

Investors brushed aside concerns about trade wars and looked ahead to next week's Federal Reserve meeting for directional cues.

Despite U.S. President Donald Trump lowering expectations of a new round of trade negotiations with China, observers suggest that a significant escalation in the U.S-China trade war was unlikely before the end of the year.

The Federal Reserve appears to be on track to hike rates by a quarter of a point next week, but there is uncertainty on how officials view the future.

Data from the Labor Department unexpectedly showed first-time claims for U.S. unemployment benefits dipped to their lowest level in nearly fifty years in the week ended September 15th.

The Labor Department said jobless claims edged down to 201,000, a decrease of 3,000 from the previous week's unrevised level of 204,000. Economists had expected jobless claims to rise to 210,000.

The currency held steady against its key counterparts in the Asian session.

The greenback fell to a 2-day low of 112.04 against the yen, after rising to 112.34 at 8:00 pm ET. The greenback is poised to find support around the 111.00 level.

The greenback declined to a 2-day low of 0.9608 against the franc, after having advanced to 0.9678 at 6:15 pm ET. On the downside, 0.94 is possibly seen as the next support level for the greenback.

The greenback dropped to 2-1/2-month lows of 1.1777 against the euro and 1.3298 against the pound, from its early highs of 1.1669 and 1.3135, respectively. The greenback is seen finding support around 1.19 against the euro and 1.34 against the pound.

The greenback slipped to more than a 3-week low of 1.2890 against the loonie, 3-week lows of 0.7289 against the aussie and 0.6678 against the kiwi, coming off from its previous highs of 1.2933, 0.7254 and 0.6601, respectively. On the downside, 1.27, 0.74 and 0.68 are possibly seen as the next support levels for the greenback against the loonie, the aussie and the kiwi, respectively.

At 10:00 am ET, U.S. leading index and existing home sales for August are scheduled for release.

At the same time, Eurozone advanced consumer sentiment index for September will be out.

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