USD/CAD drops to 3-month low and rebounds, back above 1.3700 mark

The USD/CAD pair tumbled to near three-month lows, around the 1.3675 region in the last hour, albeit quickly recovered few pips thereafter.

Following the previous session's good two-way price moves, the pair came under some fresh selling pressure on the first day of a new trading week and broke below the 100-day SMA support near the 1.3700 mark. The downward trajectory was sponsored by the prevalent US dollar selling bias and seemed rather unaffected by a mildly weaker tone surrounding crude oil prices.

The greenback added to its recent losses and remained depressed amid rising optimism over the global economic recovery from the coronavirus pandemic. The upbeat market mood was further supported by the fact that the US President did not withdraw from the US-China phase-one trade deal in reaction to the dragon nation's move to tighten control over Hong Kong.

Adding to this, widespread riots in the US further undermined the USD demand, which turned out to be one of the key factors exerting some heavy pressure on the USD/CAD pair. However, a modest pullback in crude oil prices, now down around 1$ for the day, undermine the commodity-linked currency loonie and assisted the pair to quickly rebound around 50 pips.

The pair was last seen trading around the 1.3725 region, though lacked any strong follow-through. hence, any subsequent recovery move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 1.3750 resistance zone.

Moving ahead, market participants now look forward to the US economic docket, highlighting the release of ISM Manufacturing PMI. The data might influence the USD price dynamics and produce some meaningful trading opportunities later during the early North American session.

Technical levels to watch