- USD/CAD continued losing ground for the third successive day and dropped to over a two-month low.
- The post-US CPI selling bias remained unabated and was seen as a key factor exerting some pressure.
- Retreating oil prices undermined the loonie and helped limit deeper losses amid the cautious mood.
The USD/CAD pair dropped to over a two-month low during the early European session, albeit quickly recovered few pips thereafter and was last seen trading with only modest losses, below the 1.2500 mark.
The pair witnessed some follow-through selling for the third successive day on Thursday and added to its weekly losses amid an extension of the post-US CPI US dollar downfall. Given that a March Fed rate hike was fully priced in, the USD witnessed aggressive long-unwinding in a typical “sell the fact” kind of trade following the release of US consumer inflation figures.
The selling bias remained unabated through the early part of trading on Thursday, though rebounding US Treasury bond yields and a softer risk tone extended some support to the safe-haven greenback. Apart from this, retreating crude oil prices undermined the commodity-linked loonie and helped limit any further losses for the USD/CAD pair, at least for the time being.
That said, the technical set-up still seems tilted in favour of bearish traders and supports prospects for a further near-term depreciating move. The negative outlook is reinforced by the fact that spot prices broke through the 100-day SMA support earlier this week. A subsequent slide and acceptance below the 1.2500 psychological mark also validated the bearish bias.
Hence, any attempted recovery move is more likely to attract fresh selling at higher levels and remain limited. Market participants now look forward to the US economic docket, featuring the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims. This, along with oil price dynamics, might produce some short-term trading opportunities around the USD/CAD pair.
