• USD/CAD witnessed fresh selling on Wednesday and dropped to its lowest level since April 21.
• Bullish oil prices underpinned the loonie and acted as a headwind amid a modest USD pullback.
• Sustained weakness below the 1.2500 mark would pave the way for additional near-term losses.

The USD/CAD pair struggled to preserve its modest intraday recovery gains and met with a fresh supply near the 1.2560 area on Wednesday. The intraday downfall dragged spot prices to the lowest level since April 21, around the 1.2520 region during the early North American session.

Despite rising US Treasury bond yields and the prevalent cautious mood, the safe-haven US dollar failed to capitalize on its early move up amid a goodish pickup in demand for the shared currency. Apart from this, bullish crude oil prices underpinned the commodity-linked loonie and exerted some downward pressure on the USD/CAD pair.

From a technical perspective, last week's sustained break below the very important 200-day SMA was seen as a fresh trigger for bearish traders. Moreover, the USD/CAD pair's inability to gain any meaningful traction and the emergence of fresh selling at higher levels supports prospects for an extension of a near one-month-old bearish trend.

Some follow-through selling below the 1.2500 psychological mark will reaffirm the negative bias and drag the USD/CAD pair to the next relevant support near the 1.2450 region. The downward trajectory could further get extended and allow bearish traders to challenge the YTD low, around the 1.2400 mark touched on April 5.

On the flip side, the 1.2560 region, or the daily swing high, now seems to have emerged as an immediate hurdle. Any subsequent move up might now be seen as a selling opportunity near the 1.2600 mark. This, in turn, should cap the upside for the USD/CAD pair near the 200-DMA support breakpoint, currently around the 1.2660 area.

USD/CAD daily chart

Key levels to watch