USD/CAD hangs near multi-month lows, just below 1.3200 handle

The USD/CAD pair struggled to register any meaningful recovery and remained well within the striking distance of near four-month lows set in the previous session.

Against the backdrop of the post-FOMC US Dollar selloff, a combination of supporting factors provided an additional boost to the Canadian Dollar and collaborated to the pair's slump over the past three trading sessions. 

Wednesday's hotter-than-expected Canadian inflation figures might now encourage the BoC to retain its current policy at the upcoming meeting in July and was seen as one of the key factors supporting the domestic currency. 

This coupled with the ongoing upsurge in Crude Oil prices further underpinned the commodity-linked currency - Loonie and contributed to this week's steep decline of around 280-pips from levels beyond the 1.3400 handle.

Oil prices rallied to fresh monthly tops and remained supported by escalating geopolitical tensions in the Middle East, especially after Iran’s Revolutionary Guard shot down the US surveillance drone near Strait of Hormuz.

Meanwhile, investors now seemed to have digested the latest dovish shift by the Fed, with a modest pickup in the US Treasury bond yields pushing the greenback a bit higher and helping limit further losses, at least for the time being.

Investors now look forward to Friday's important Canadian macro data - monthly retail sales figures, which coupled with the release of flash US manufacturing PMI might produce some short-term trading opportunities later in the day.

Technical levels to watch