USD/CAD drops to session lows, around mid-1.3500s amid fresh USD selling

• A combination of factors led to the USD/CAD pair’s intraday pullback from weekly tops.
• The USD failed to attract haven flows despite concerns about rising COVID-19 cases.
• A modest uptick in oil prices underpinned the loonie and added to the selling bias.

The USD/CAD pair extended its steady intraday pullback from weekly tops and continued losing ground through the early North American session. The pair was last seen trading near the lower end of its daily trading range, around the 1.3555 region.

Following an early uptick to the 1.3625 region, the pair met with some fresh supply and has now eroded a major part of the previous day’s strong positive move of around 85 pips. The downfall was sponsored by a combination of factors, including the emergence of some fresh selling around the US dollar and a modest uptick in crude oil prices.

The greenback struggled to preserve the overnight gains and remained on the defensive through the major part of trading action on Wednesday. Despite worries about the continuous rise in the number of coronavirus cases, a modest recovery in the US equity markets turned out to be one of the key factors that dented the USD’s safe-haven status.

On the other hand, the commodity-linked currency – the loonie – benefitted from stable crude oil prices. Oil traders refrained from placing any aggressive bets, rather preferred to stay away ahead of the EIA crude stock data, due later this Wednesday. Nevertheless, a mildly positive tone surrounding oil prices contributed to the USD/CAD pair’s slide.

It will now be interesting to see if the pair can attract any buying at lower levels or continues with its intraday bearish trend amid absent relevant market-moving economic releases, either from the US or Canada. A convincing break below the 1.3525-20 strong support will now set the stage for an extension of the recent downfall witnessed over the past two weeks or so.

Technical levels to watch