USD/CAD slides further below mid-1.2700s amid rebounding oil prices/weaker USD

• USD/CAD witnessed heavy selling on Monday and retreated further away from YTD tops.
• A solid bounce in oil prices underpinned the loonie and exerted pressure amid weaker USD.
• Investors eye the US PMI prints for some impetus ahead of the Jackson Hole Symposium.

The USD/CAD pair extended its steady intraday descent through the first half of the European session and dropped to two-day lows, around the 1.2735 region in the last hour.

The extended Friday's sharp retracement slide from YTD tops, around mid-1.2900s and witnessed some follow-through selling on the first day of a new trading week. A solid rebound in crude oil prices underpinned the commodity-linked loonie. This, along with the ongoing US dollar corrective pullback, prompted some long-unwinding trade around the USD/CAD pair.

Worries that the continuous surge in coronavirus cases of the Delta variant could derail the global economic recovery forced investors to scale back their expectations for the Fed's tapering plan. Apart from this, a generally positive tone around the equity markets further undermined the safe-haven greenback and exerted pressure on the USD/CAD pair.

That said, new travel restrictions in many countries might have dampened prospects for a swift recovery in the global fuel demand. This might act as a headwind for oil prices. Conversely, a goodish pickup in the US Treasury bond yields might help limit any deeper USD losses and lend some support to the USD/CAD pair, at least for the time being.

Investors might also refrain from placing any aggressive bets, rather prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's speech at the Jackson Hole Symposium. Hence, it will be prudent to wait for some strong follow-through selling before confirming that the USD/CAD has topped out and positioning for any further depreciating move.

Market participants now look forward to the release of the flash US Manufacturing and Services PMIs later during the early North American session. This, along with the broader market risk sentiment and the US bond yields, might influence the USD. Traders might further take cues from oil price dynamics for some short-term opportunities around the USD/CAD pair.

Technical levels to watch