USD/CAD reverses a knee-jerk slide to 1.3570 area amid falling oil prices

   “¢   The prevalent USD selling bias prompts some aggressive long-unwinding trade.
   “¢   A sharp fall in crude oil prices undermined Loonie and helped limit the downside.  

The USD/CAD pair extended its sharp intraday slide and tumbled to 1.3570 area in the last hour, albeit quickly recovered over 40-pips thereafter.

After repeated failed attempts to make it through the 1.3660-65 strong horizontal resistance, the prevalent bearish sentiment surrounding the US Dollar prompted some aggressive long-unwinding trade on the first trading day of the New Year.  

The USD bulls held on the defensive amid expectations of a slower pace of Fed rate hikes in 2019, which coupled with partial US government shutdown turned out to be one of the key factors exerting some downward pressure on the major.  

However, the ongoing downfall in crude oil prices, amid concerns over global economic growth and a surge in US oil output to an all-time high of 11.537 million bpd in October undermined the commodity-linked currency – Loonie and helped limit deeper losses.

The pair has now moved back above the 1.3600 handle and in absence of any major market moving economic releases, the USD/oil price dynamics might continue to act as key determinants of the momentum through Wednesday’s trading session.

Technical levels to watch