USD/CAD slides further below 1.2500, closer to multi-week lows amid weaker USD

• The prevalent USD bearish sentiment prompted fresh selling around USD/CAD on Monday.
• Reduced Fed rate hike bets, sliding US bond yields continued undermining the greenback.
• The set-up favours bearish traders and supports prospects for an extension of the downfall.

The USD witnessed some selling during the early European session and dragged the USD/CAD pair below the key 1.2500 psychological mark. The pair has now dropped back closer to multi-week lows touched last Thursday and was last seen hovering around the 1.2485 region.

The pair struggled to capitalize on its early uptick, instead met with a fresh supply near the 1.2525-30 area and turned lower for the second consecutive session on Monday. This marked the fourth day of a negative move in the previous five and was exclusively sponsored by the prevalent bearish sentiment surrounding the US dollar.

Despite the incoming strong US economic data, investors seem convinced that the Fed will keep interest rates near zero levels for a longer period. This was evident from the recent decline in the yield on the benchmark 10-year US government bond, which retreated further from over one-year tops touched in March and sank to 1.5280% last week.

Meanwhile, renewed fears about another dangerous wave of coronavirus infections globally took its toll on the global risk sentiment, though failed to provide any respite to the safe-haven USD. Even a subdued action around crude oil prices, which tend to influence the commodity-linked loonie, also did little to lend any support to the USD/CAD pair.

From a technical perspective, weakness back below the 1.2500 mark adds credence to last week’s bearish breakthrough a short-term trading range and supports prospects for a further decline. Hence, a subsequent slide back towards the 1.2400 mark, en-route multi-year lows near the 1.2365 region, looks a distinct possibility amid an empty economic docket.

Technical levels to watch