USD/CAD holds weaker near 1.3700 mark, downside seems limited amid sliding oil prices

• USD/CAD remains depressed on Wednesday amid some renewed USD selling bias.
• Weaker oil prices undermined the loonie and helped limit losses, at least for now.

The USD/CAD pair traded with a mild negative bias through the early European session and is currently placed near the lower end of its daily trading range, around the 1.3700 round-figure mark.

Following the previous day's rather volatile swings, the pair edged lower on Wednesday and might now be looking to extend its retracement from over four-year tops amid some renewed US dollar selling bias. The greenback failed to capitalize on the overnight strong recovery move and witnessed some renewed selling on doubts over the US President Donald Trump's proposed economic stimulus package.

The downside seems limited

Meanwhile, persistent worries about the impact of the coronavirus epidemic continued weighing on investors' sentiment. This was evident from a fresh leg down in the global equity markets and the US Treasury bond yields, which kept the USD bulls on the defensive. This eventually turned out to be one of the key factors exerting some pressure, albeit the downside remains cushioned on weaker oil prices.

Oil struggled to preserve the early modest gains and was down 1.5% for the day, which undermined demand for the commodity-linked currency – the loonie – and should limit any deeper losses. Growing market concerns about the coronavirus-led slowdown in the demand largely offset the early optimism over Russia’s indirect signals of production cut talks with Saudi Arabia and weighed on the commodity.

Moving ahead, market participants now look forward to Wednesday's important release of the latest US consumer inflation figures. Following the data, the US Treasury Secretary Steven Mnuchin will testify on the Proposed Fiscal Year 2021 Budget, which should play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities.

Technical levels to watch