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  • USD/CAD remained depressed for the fifth consecutive session on Monday.
  • The USD was being weighed down by the Fe’s dovish signal last Thursday.
  • A pickup in oil prices underpinned the loonie and added to the selling bias.

The USD/CAD pair edged lower during the early European session and was last seen trading near daily lows, around the 1.3080-75 region.

The pair struggled to capitalize on Friday’s late rebound from mid-1.3000s, or multi-month lows and remained depressed for the fifth consecutive session. The downtick was sponsored by a combination of factors – the prevalent bearish sentiment surrounding the US dollar and a goodish pickup in crude oil prices.

The greenback continues to be weighed down by the Fed Chair Jerome Powell’s dovish signals last Thursday. During his keynote speech at the Jackson Hole Symposium, Powell outlined a new policy strategy and said that the Fed is willing to allow inflation to overshoot the 2.0% target to support the labor market.

On the other hand, the Canadian dollar was being supported by Friday’s better-than-expected Canadian GDP report. In fact, the economy recorded a stronger than expected growth of 6.5% in June. Meanwhile, the economic activity contracted sharply by 38.7% annualized pace during the second quarter of 2020 as against 39.6% anticipated.

Apart from this, modest gains in oil prices provided an additional boost to the commodity-linked currency – loonie – and further collaborated towards capping the upside for the USD/CAD pair. The better-than-expected Chinese PMI prints helped offset concerns about demand recovery, instead underpinned oil prices.

However, the downside is likely to remain limited, at least for the time being, as investors might now refrain from placing aggressive bets ahead of this week’s important US macro data, scheduled for release at the start of a new month. This, in turn, warrants some caution for bearish traders and positioning for any further weakness.

Technical levels to watch

 

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