USD/CAD drops to over one-week low, holds above 1.3300 mark ahead of US CPI

• USD/CAD drifts into negative territory for the third successive day amid sustained USD selling.
• Sliding Crude Oil prices could undermine the Loonie and help limit the downside for the major.
• Traders might also refrain from placing aggressive bearish bets ahead of the key US CPI report.

The USD/CAD pair meets with a fresh supply following an early uptick to the 1.3355 region and turns lower for the third successive day on Tuesday. The pair drops to a one-and-half-week low, around the 1.3320 region heading into the North American session and is pressured by strong follow-through selling around the US Dollar.

In fact, the USD Index, which tracks the Greenback against a basket of currencies, extends the previous day's retracement slide from a multi-week high amid a further decline in the US Treasury bond yields. Apart from this, a mildly positive tone around the equity markets is seen as another factor weighing on the safe-haven buck. That said, weaker Crude Oil prices could undermine the commodity-linked Loonie and help limit the downside for the major, at least for the time being.

Traders might also refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the release of the US consumer inflation figures. The US Labor Department's annual revisions of CPI data last Friday, which showed that monthly consumer prices rose in December instead of falling as previously estimated, raises the risk of a stronger US CPI print. This, in turn, supports prospects for further policy tightening by the Fed and favours the USD bulls.

Heading into the key US data risk, the aforementioned fundamental backdrop warrants some caution for bearish traders and before positioning for any further depreciating move for the USD/CAD pair. Hence, any subsequent slide is more likely to find decent support and remain limited near the 1.3300 mark. The said handle should act as a pivotal point for intraday traders, which if broken should pave the way for deeper losses and expose the monthly low, around the 1.3260 region.

Technical levels to watch