USD/CAD on the defensive near 2-week lows, around 1.3500 mark

• USD/CAD struggled to register any meaningful recovery amid sustained USD selling.
• A modest pullback in oil prices undermined the loonie and helped limit deeper losses.

The USD/CAD pair remained depressed through the early European session, with bears now looking to extend the fall further below the key 1.3500 psychological mark.

Despite the ever-increasing number of new coronavirus cases, investors remain cautiously optimistic amid hopes of a sharp V-shaped global economic recovery. This, in turn, continued denting demand for the safe-haven US dollar and kept the USD/CAD pair on the defensive through the first half of trading action on Thursday.

This comes on the back of the previous day’s fall of around 130 pips from levels beyond the 1.3600 mark, or weekly tops, and support prospects for further weakness for the USD/CAD pair. However, a modest pullback in crude oil prices might undermine the commodity-linked currency – the loonie and help limit deeper losses.

Hence, it will be prudent to wait for some strong follow-through selling before traders start positioning for an extension of the depreciating move. A sustained break below the 1.3485 region will set the stage for a slide towards the 1.3400 mark en-route June monthly swing lows support, around the 1.3315 region.

Market participants now look forward to Thursday economic docket, featuring the release of Canadian Housing Starts and the Initial Weekly Jobless Claims from the US. This, along with the broader market risk sentiment and the US/oil price dynamics might provide some trading impetus later during the early North American session.

Technical levels to watch