USD/CAD drops to 3-week lows, around mid-1.3300s
• The prevalent USD selling bias keeps exerting downward pressure on Monday.
• A stronger recovery in oil prices further underpin Loonie and add to the selling bias.
The USD/CAD pair now seems to have entered a bearish consolidation phase and was seen oscillating in a narrow trading band around mid-1.3300s, or near three-week lows.
The pair traded with a mild negative bias for the fourth consecutive session, with a combination of factors now paving the way for an extension of last week's sharp retracement slide from the 1.3660-65 supply zone, or 19-month tops.
Despite Friday's blockbuster US monthly jobs report, growing bets that the Fed might halt its policy tightening cycle in 2019 kept the US Dollar bulls on the defensive at the start of a new trading week and failed to provide any immediate respite.
This coupled with a strong follow-through recovery in crude oil prices, supported by renewed optimism over the US-China trade talks and OPEC-led supply cuts, further underpinned the commodity-linked currency - Loonie and collaborated to the pair's weaker tone.
It would now be interesting to see if the pair is able to attract any buying interest at lower levels or the ongoing bearish slide marks the end of the recent upsurge as market participants now look forward to the release of US ISM non-manufacturing PMI for some fresh impetus.
Technical levels to watch
A follow-through selling is likely to accelerate the fall towards testing the 1.3300 handle before the pair eventually drops to the 1.3350-40 support area. On the flip side, the 1.3390-1.3400 region now seems to cap any attempted recovery move, above which a bout of short-covering could further assist the pair towards challenging the 1.3475-85 supply zone.