USD/CAD flirts with 1-1/2-week lows, around 1.3500 mark

• A broad-based USD selloff prompted some fresh selling around the USD/CAD pair.
• Positive oil prices underpinned the loonie and contributed to the pair’s weaker tone.
• A break below the 1.3500 mark might have already set the stage for further weakness.

The USD/CAD pair fell below the key 1.3500 psychological mark, hitting near two-week lows in the last hour, albeit quickly recovered few pips thereafter.

The pair failed to capitalize on its early uptick, rather met with some fresh supply near the very important 200-day SMA, around the 1.3570 region. The downfall was sponsored by a combination of factors, including a broad-based US dollar selloff and the ongoing bullish run in crude oil prices.

The greenback came under some intense selling pressure and extended the previous day's retracement slide from three-week tops. The move came after White House trade advisor Peter Navarro backtracked and stated that his comments on the US-China trade agreement had been taken wildly out of context.

Adding to this, the US President Donald Trump provided further assurance and tweeted that US-China trade pact signed in January remains in place. This, in turn, triggered a positive turnaround in the global equity markets and exerted some heavy downward pressure on the safe-haven greenback.

The USD bulls remained on the defensive and seemed rather unimpressed by Tuesday's mixed US macro data. The flash version of the US Manufacturing and Services PMI fell short of consensus estimates, while the Richmond Manufacturing Index and New Home Sales came in slightly better-than-expected.

Apart from this, some follow-through positive move in crude oil prices underpinned the commodity-linked currency – the loonie – and further contributed to the USD/CAD pair's offered tone through the early North American session.

Meanwhile, a break below the 1.3500 mark might have already paved the way for further near-term weakness. Hence, some follow-through weakness back towards the 1.3415 horizontal support, en-route the recent daily closing lows near the 1.3380 region, now looks a distinct possibility.

Technical levels to watch