USD/CAD drops to session low and rebounds, back near mid-1.3500s

• USD/CAD failed to capitalize on its early uptick to levels beyond the 1.3600 mark.
• Sliding US bond yields weighed on the USD and exerted some downward pressure.
• A goodish pickup in oil prices underpinned the loonie and added to the selling bias.

The USD/CAD pair extended its intraday pullback from levels beyond the 1.3600 round-figure mark and refreshed session lows in the last hour, albeit quickly recovered few pips thereafter.

Following an early uptick, the pair met with some fresh supply and drifted into the negative territory during the first half of the European trading action. The downfall marked the USD/CAD pair's fourth day of a negative move in the previous five and was sponsored by a combination of factors, including the emergence of some US dollar selling and an intraday rebound in crude oil prices.

Concerns about a surge in new coronavirus cases, which coupled with escalating geopolitical tensions in Asia continued weighing on investors' sentiment. This was evident from the prevalent cautious mood around the equity markets. The greenback, however, struggled to attract any safe-haven bids, instead was pressured by a weaker tone surrounding the US Treasury bond yields.

On the other hand, a goodish intraday bounce in oil prices provided a modest lift to the commodity-linked currency – the loonie – and contributed to the USD/CAD pair's intraday slide of around 90 pips. The pair has now drifted back closer to the lower end of its weekly range, though bears might wait for a sustained break below the 1.3500 psychological mark before placing fresh bets.

Moving ahead, market participants now look forward to Thursday economic docket for some impetus later during the early North American session. The release of Initial Weekly Jobless Claims and Philly Fed Manufacturing Index might influence the USD price dynamics. This coupled with the Canadian ADP report might further collaborate to produce some meaningful trading opportunities.

Technical levels to watch