• USD/CAD drifts lower for the second straight day amid a modest USD downtick.
• Sliding Oil prices undermine the Loonie and should help limit any further losses.
• The technical setup warrants caution before positioning for a meaningful decline.

The USD/CAD pair turns lower for the second successive day on Thursday and moves away from a fresh YTD peak, around the 1.3585 region touched earlier this week. Spot prices trade around the 1.3535-1.3530 area, down less than 0.10% during the first half of the European session as traders now look to the US macro data for a fresh impetus.

A further decline in the US Treasury bond yields keeps the US Dollar (USD) bulls on the defensive below its highest level since November 14 touched the previous day and is seen as a key factor weighing on the USD/CAD pair. That said, the prevalent selling bias around Crude Oil prices might undermine the commodity-linked Loonie and help limit any meaningful downside.

From a technical perspective, the USD/CAD pair once again struggled to find acceptance above the 100-day Simple Moving Average (SMA). The subsequent slide from the 1.3600 neighbourhood constitutes the formation of a double-top pattern on the daily chart. That said, oscillators on the daily chart are still holding in the positive territory and warrant caution for bears.

Hence, it will be prudent to wait for strong follow-through selling before confirming that the USD/CAD pair has topped out in the near term and positioning for any meaningful corrective decline. In the meantime, the 1.3500 psychological mark is likely to protect the immediate downside ahead of the very important 200-day SMA, currently pegged around the 1.3475 region