USD/CAD drops to fresh weekly low, further below 1.2700 mark amid modest USD weakness

• USD/CAD came under intense selling pressure on Wednesday and dived to a fresh weekly low.
• The risk-on impulse weighed on the safe-haven USD and exerted downward pressure on the pair.
• Bulls seemed rather unimpressed by softer crude oil prices, which tend to undermine the loonie.

The USD/CAD pair continued losing ground through the early North American session and dropped to a fresh weekly low, around the 1.2680 region in the last hour.

Having faced rejection near the 1.2780-1.2785 supply zone, the USD/CAD pair witnessed aggressive long-unwinding trade on Wednesday amid renewed US dollar selling bias. The fact that new economic sanctions on Russia were not as bad as feared helped ease the nervousness about the situation in Ukraine and boosted investors' confidence. This was evident from a generally positive tone around the equity markets, which, in turn, weighed on the safe-haven greenback.

That said, a fresh leg up in the US Treasury bond yields should act as a tailwind for the greenback. Apart from this, modest downtick in crude oil prices could undermine the commodity-linked loonie and help limit any further losses for the USD/CAD pair, at least for now. The fundamental backdrop supports prospects for the emergence of dip-buying around the USD/CAD pair and warrants some caution for bearish traders amid absent relevant market moving economic releases.

From a technical perspective, the good two-way price moves witnessed over the past four weeks or so points to indecision among traders over the next leg of a directional move for the USD/CAD pair. Moreover, repeated failures near the said trading range hurdle make it prudent to wait for some follow-through buying before positioning for any meaningful upside. Nevertheless, any subsequent decline is more likely to find decent support near the 1.2655-1.2650 region.

Technical levels to watch