USD/CAD nosedives to 3-1/2 month lows, farther below 1.3200 handle

The USD/CAD pair continued losing ground through the mid-European session and weakened farther below the 1.3200 handle, hitting fresh 3-1/2 month lows in the last hour.

The pair extended this week's pullback from levels beyond the 1.3400 handle, with a combination of factors exerting some heavy bearish pressure and fueling the ongoing decline for the third consecutive session on Thursday.

The US Dollar dropped to its lowest level in three months on Thursday in the aftermath of dovish sounding Fed, indicating that it remains ready to ease monetary policy to combat subdued inflation and slowing growth.

On the other hand, the Canadian Dollar remained supported by Wednesday's hotter-than-expected consumer inflation figures, which might encourage the BoC to retain the current policy at its next meeting in July.

This coupled with a strong rally in Crude Oil prices provided an additional boost to the commodity-linked currency - Loonie and further collaborated to the pair's steep downfall to its lowest level since early-March.

In fact, Oil prices rallied over 3.5% and moved back closer to $56.00/barrel mark amid escalating tensions in the Middle East, especially after a US military drone was reportedly shot down by an Iranian surface-to-air missile.

Thursday's slide could further be attributed to some aggressive technical selling once the pair found acceptance below the very important 200-day SMA support and the previous swing lows support near the 1.3240 region. 

The US economic docket - featuring the release of Philly Fed Manufacturing Index and weekly jobless claims data, along with Canadian ADP report on private sector employment will now be looked upon for some fresh impetus.

Technical levels to watch