USD/CAD weakens further below 1.2800 mark, drops to fresh two-week low

• USD/CAD prolonged its recent bearish trend and dropped to a fresh two-week low on Friday.
• The tight supply outlook acted as a tailwind for crude oil prices, which underpinned the loonie.
• Subdued USD price action did little to impress bullish traders or lend any support to the pair.

The USD/CAD pair added to the previous day's losses and witnessed some follow-through selling for the second successive day on Friday. This also marked the fifth day of a negative move in the previous six and dragged spot prices to a fresh two-week low, around the 1.2780-1.2775 region during the first half of the European session.

Despite concerns that weakening global economic growth could curb a recovery in fuel demand, a tight supply outlook acted as a tailwind for crude oil prices. Apart from this, strong domestic consumer inflation figures released on Wednesday underpinned the commodity-linked loonie and exerted some downward pressure on the USD/CAD pair.

On the other hand, the US dollar languished near its lowest level since May 5 and was pressured by the recent sharp pullback in the US Treasury bond yields. Apart from this, the risk-on impulse in the markets was seen as another factor that weighed on the safe-haven greenback and contributed to offered toe surrounding the USD/CAD pair.

with the latest leg down, spot prices now seem to have found acceptance below the 1.2800 round-figure mark. This could be seen as a fresh trigger for bearish traders and supports prospects for additional losses. That said, expectations for a more aggressive policy tightening by the Fed might act as a tailwind for the buck and the USD/CAD pair.

There isn't any major market-moving economic data due for release on Friday, either from the US or Canada. Hence, the USD remains at the mercy of the US bond yields and the broader market risk sentiment. Apart from this, traders will take cues from oil price dynamics to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch