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  • A combination of factors weighed on USD/CAD for the third straight session on Thursday.
  • The USD languished near three-week lows amid reduced bets for an earlier Fed rate hike.
  • Bullish oil prices underpinned the loonie and further collaborated the intraday selling bias.

The USD/CAD pair refreshed monthly lows through the early European session, with bears now looking to extend the downward trajectory further below the key 1.2500 psychological mark.

The pair edged lower for the third consecutive session on Thursday and now seems all set to prolong this week’s rejection slide from the 1.2625-30 supply zone. The downtick was sponsored by a combination of factors – the prevalent US dollar selling bias and a bullish tone surrounding crude oil prices.

The USD languished near three-week lows amid reduced bets for an early Fed rate hike. Tuesday’s US CPI report reinforced the Fed’s view that higher inflation will be transitory. This, along with repeated assurances from Fed officials that rates will stay low, kept the USD bulls on the defensive.

Apart from this, the recent pullback in the US Treasury bond yields from a 14-month peak of 1.776% touched in March further undermined the greenback. The underlying bullish sentiment in the markets also did little to provide any respite to the safe-haven USD or lend any support to the USD/CAD pair.

On the other hand, the commodity-linked loonie benefitted from the overnight surge in crude oil prices. In fact, WTI futures rallied nearly 5% on Wednesday after the IEA raised its annual demand forecast for 2021 and the EIA report showed a draw of 5.889 million barrels in US crude supplies.

Despite the negative factors, the USD/CAD pair, so far, has managed to defend the 1.2500 mark. The mentioned level marks the lower boundary of a near one-month-old trading range. A convincing breakthrough will be seen as a fresh trigger for bearish traders and prompt some technical selling.

Market participants now look forward to the releases of monthly Retail Sales figures, Philly Fed Manufacturing Index and Initial Weekly Jobless Claims from the US. Apart from this, the US bond yields and the broader market risk sentiment, will influence the USD and provide a fresh trading impetus.

Technical levels to watch