USD/CAD struggles near three-week lows, just below 1.2700 mark

• USD/CAD edged lower for the fourth consecutive session on Wednesday.
• The risk-on mood weighed on the safe-haven USD and exerted pressure.
• A softer tone around oil prices helped limit any deeper losses for the pair.

The USD/CAD pair broke down of its intraday consolidative trading range and dropped to near three-week lows, around the 1.2680 region during the early European session.

The pair added to last week's losses and witnessed some follow-through selling for the fourth consecutive session on Wednesday. The prevalent upbeat market mood dented the US dollar's relative safe-haven status, which, in turn, was seen as a key factor exerting pressure on the USD/CAD pair.

The global risk sentiment remained well supported by the optimism over the progress in coronavirus vaccinations. This, along with the likelihood for a massive US fiscal spending plan, has been fueling hopes for a strong global economic recovery and continued boosting investors' confidence.

Even a modest uptick in the US Treasury bond yields did little to provide any respite to the USD. It is worth reporting that developments to fast-track President Joe Biden's $1.9 trillion COVID-19 relief package pushed the US Treasury bond yields to near one-year tops earlier this month.

That said, a softer tone around crude oil prices, down around 0.25% for the day, kept a lid on any strong gains for the commodity-linked loonie. This was seen as the only factor that extended some support to the USD/CAD pair and helped limit any deeper losses, at least for the time being.

Moving ahead, Wednesday's US economic docket – highlighting the release of the latest consumer inflation figures – will be looked upon for a fresh impetus. Apart from this, the broader market risk sentiment will influence the USD price dynamics and produce some meaningful trading opportunities.

Technical levels to watch