USD/CAD slides to two-week low, challenges ascending channel support near 1.2770 area

• USD/CAD turned lower for the second successive day and dropped to a two-week low.
• The USD struggled to preserve its intraday gains and acted as a headwind for the pair.
• The ascending channel support might help limit losses amid retreating crude oil prices.

The USD/CAD pair edged lower through the mid-European session and dropped to a two-week low, around the 1.2770 region in the last hour.

Following an early uptick to the 1.2810-15 area, the USD/CAD pair met with a fresh supply on Thursday and turned lower for the second successive day. This also marked the third day of a negative move in the previous four sessions and was sponsored by the emergence of some US dollar selling at higher levels.

The underlying bullish sentiment continued to act as a headwind for the safe-haven greenback, which was further pressured by retreating US Treasury bond yields. Despite the continuous surge in new COVID-19 cases, investors remain optimistic amid signs that the Omicron variant might be less severe than feared.

This was evident from an extension of the recent bullish run in the equity markets. This helped offset weaker crude oil prices, which tend to undermine the commodity-linked loonie. The USD/CAD pair, however, has managed to defend ascending trend-channel support, warranting some caution for bearish traders.

Market participants now look forward to the US economic docket, featuring the releases of Weekly Initial Jobless Claims and Chicago PMI. This, along with the US bond yields, will influence the USD. Traders will take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair.

Technical levels to watch