USD/CAD struggles near multi-month lows, around 1.3070-65 region

• USD/CAD remained depressed for the fifth consecutive session on Monday.
• The Fed’s dovish signal, the risk-on mood continued weighing on the buck.
• A pickup in oil prices underpinned the loonie and added to the selling bias.

The USD/CAD pair maintained its offered tone through the mid-European session and was last seen hovering near daily lows, around the 1.3070-65 region.

A combination of factors failed to assist the USD/CAD pair to capitalize on Friday's bounce from mid-1.3000s, or multi-month lows, instead exerted some pressure for the fifth consecutive session. The US dollar added to last week's heavy losses and remained depressed in the wake of the Fed's policy shift on inflation.

It is worth recalling that the Fed Chair Jerome Powell on Thursday outlined a new policy strategy and said that the US central bank is willing to let inflation run above its 2% inflation target to support the labor market. The move to prioritize employment over inflation fueled speculations that rates will stay lower for longer.

Apart from this, the greenback was further pressured by the prevalent upbeat market mood. The already stronger global risk sentiment got an additional boost on Monday following the release of better-than-expected Chinese Manufacturing and Services PMI prints for August, which dented the USD's relative safe-haven status.

On the other hand, the Canadian dollar was being supported by Friday's better-than-expected domestic GDP growth figures for June. Adding to this, a goodish pickup in crude oil prices, now up over 1% for the day, further underpinned the commodity-linked currency – the loonie – and contributed to the USD/CAD pair's downfall.

It will now be interesting to see bears maintained their dominant position and or opt to lighten their positions amid absence relevant market-moving economic releases, either from the US or Canada. Nevertheless, a subsequent fall below the 1.3050-45 area will set the stage for additional weakness towards the key 1.3000 psychological mark.

Technical levels to watch