USD/CAD corrects from 4-year tops, downside seems limited amid a slump in oil prices
- USD/CAD failed to capitalize on its early positive move to over four-year tops.
- Sliding US bond yields led to some USD weakness and prompted profit-taking.
- Weaker crude oil prices might undermine the loonie and help limit deeper losses.
The USD/CAD pair extended its intraday pullback from over four-year tops and refreshed daily lows, around the 1.3755 region during the early European session.
The pair failed to capitalize on its early uptick to levels beyond the 1.3800 round-figure mark and has now drifted into the negative territory amid some renewed US dollar selling.
Falling oil prices might help limit losses
Growing market concerns about the economic impact of the coronavirus continued weighing on investors' sentiment and the same was evident from a selloff across the global equity markets.
The already weaker sentiment took another blow after the World Health Organization declared COVID-19 a pandemic and the US President Donald Trump suspended all travel from Europe for 30 days.
The anti-risk flow was further reinforced by a fresh leg down in the US Treasury bond yields, which kept the USD bulls on the defensive and prompted some profit-taking around the major.
Meanwhile, the USD failed to gain any respite from the fact that Democrats on Wednesday unveiled a broad package of proposals to help Americans affected by the coronavirus outbreak.
The pair's intraday slide of over 60 pips seemed rather unaffected by a slump in crude oil prices, which tend to undermine demand for the commodity-linked currency – the loonie.
Hence, it will be prudent to wait for some strong follow-through selling before confirming that the pair might have topped out in the near-term and positioning for any further corrective slide.
Technical levels to watch