USD/CAD slides to over 5-month lows, closer to mid-1.3200s

The USD/CAD pair weakened further below the 1.3300 mark and dropped to the lowest level since February 26 during the early European session on Wednesday.

The pair witnessed some follow-through selling through the first half of the trading action on Wednesday and broke below the June monthly swing lows support near the 1.3315 region. The prevalent bearish sentiment surrounding the US dollar was seen as one of the key factors behind the downfall, which accelerate further amid a modest pickup in crude oil prices.

The greenback remained depressed well within the striking distance of two-year lows amid worries that the ever-increasing coronavirus cases could undermine the US economic recovery. This coupled with the impasse over the next round of the US fiscal stimulus measures further undermined the already weaker buck and led to the fourth day of a negative move for the USD/CAD pair.

Apart from a broad-based USD weakness, an uptick in crude oil prices provided an additional boost to the commodity-linked currency – the loonie – and further contributed to the USD/CAD pair's ongoing bearish slide. Oil prices remained well supported by Tuesday's report, which showed a larger than expected fall in the US inventories for the week ending July 31.

Meanwhile, a sustained breakthrough the previous swing lows and a subsequent weakness below the 1.3300 round-figure mark further seemed to have prompted some technical selling. Hence, some follow-through slide towards testing the next major support, around the 1.3220-1.3200 region, now looks a distinct possibility.

Later during the early North American session, a duo of important US macro releases will be looked upon for some meaningful trading opportunities. Wednesday's US economic docket highlights the release of the ADP report on private-sector employment and ISM Non-Manufacturing PMI for the month of July.

Technical levels to watch