USD/CAD struggles near multi-month lows, just above mid-1.2300s
- USD/CAD prolonged its weekly bearish trend and dropped to over three-month lows on Friday.
- Bullish oil prices underpinned the loonie and exerted pressure amid a subdued USD demand.
- Oversold RSI on hourly charts warrants some caution before placing aggressive bearish bets.
The USD/CAD pair remained depressed through the Asian session and was last seen hovering near the lowest level since July 6, just above mid-1.2300s.
Crude oil prices held steady near multi-year tops and remained supported by increasing signs of tight supply over the next few months. This, in turn, continued underpinning the commodity-linked loonie and was seen as a key factor that acted as a headwind for the USD/CAD pair amid a subdued US dollar price action.
Despite Wednesday's slightly stronger US CPI report, the USD witnessed a corrective pullback from 13-month tops as investors still seem unconvinced about a sustained period of inflation. This was reinforced by a sharp decline in the longer-dated US Treasury bond yields, which prompted USD long-unwinding trade.
Moreover, the markets now seem to have fully priced in the prospects for an early policy tightening by the Fed. This, along with the prevalent risk-on mood, held traders from placing fresh bullish bets around the safe-haven greenback. This was seen as another factor that exerted some pressure on the USD/CAD pair.
From a technical perspective, the overnight decline below the 1.2400 mark confirmed a bearish break through the lower boundary of a short-term descending channel. This might have already set the stage for further losses, though oversold RSI on hourly charts warrants some caution before placing aggressive bearish bets.
The market focus now shifts to the release of US monthly Retail Sales figures later during the early North American session. This, along with the US bond yields, will influence the USD and provide some impetus to the USD/CAD pair. Traders will further take cues from oil price dynamics for some short-term opportunities.
Technical levels to watch