USD/CAD off lows, still on the defensive around 1.3665-70 region

• The USD/CAD edged lower on Monday amid some renewed USD selling bias.
• Weaker oil prices undermined the loonie and helped limit losses for the pair.

The USD/CAD pair traded with a mild negative bias through the early European session, albeit lacked any strong follow-through selling below mid-1.3600s.

The pair witnessed some selling on the first day of a new trading week and eroded a part of Friday’s positive move to near four-week tops. The downtick was exclusively sponsored by the emergence of some fresh US dollar selling, though a weaker tone surrounding oil prices helped limit deeper losses for the USD/CAD pair.

Despite growing worries about the second wave of COVID-19 infections, the greenback struggled to attract any safe-haven flows and remained depressed through the first half of Monday’s trading action. A weaker USD was seen as one of the key factors exerting some pressure on the USD/CAD pair and led to a modest intraday downtick.

Meanwhile, worries that a surge in the number of new coronavirus cases could force some countries to resume partial lockdowns dampened prospects for a swift recovery in the fuel demand. This, in turn, led to some weakness in oil prices, which undermined the commodity-linked currency – the loonie – and helped limit losses for the pair.

The USD/CAD pair has now recovered around 20-25 pips and was last seen trading in the neutral territory, around the 1.3665-70 region. Moving ahead, market participants now look forward to some second-tier economic releases from Canada and the US for some short-term trading impetus later during the early North American session.

Technical levels to watch