There were big moves across dollar pairs in trading yesterday and USD/CAD was no exception as it cast aside the memory of the jump to 1.2980 last Friday in a drop back below 1.2800 in the aftermath of the US CPI data release. There hasn't been much relief since the drop with the slight retracement earlier stalling at the 100-day moving average (red line) at 1.2793 - a level that was broken yesterday and which helped to stall the downside trend initially on 1 August.
The break below the key technical level is a boost to sellers and opens up the path towards testing the 200-day moving average (blue line) next at 1.2741. That is the key support level to watch now as a break below that will pave the way for a further downside leg in the pair.
It isn't much of a coincidence that we are seeing dollar pairs in general move close towards testing another round of key technical levels in which a break might set off the next downside leg for the dollar.
I want to say that the late surge in oil prices yesterday helped to keep the loonie steadier but considering its recent volatility, it's hard to really pin down such a move to fluctuations in oil. For now, dollar sentiment is still the key driver in FX and the technicals are what is defining the action at the moment as seen with the euro, pound, and yen as well.