USD/CAD inter-markets: could slide sharply if oil manages to recover from multi-month lows

Following Wednesday's release of FOMC statement, which was deemed as dovish by market participants, the US Dollar has witnessed intense selling pressure against it major counterparts. Against the Canadian Dollar the slide has been limited, with the USD/CAD pair loosing around 150-pips from a multi-month high level of 1.3250 touched post-FOMC announcement to currently trade around 1.3100 handle. 

Meanwhile, a disappointing quarterly US GDP growth number has now further diminished the prospects of an eventual Fed rate-hike during 2016 and has dragged the US 10-year treasury yields sharply lower. The Canadian 10-year yields also fell simultaneously after data showed Canadian economy contracting by more-than-expected during the month of May. Fall in yields and narrowing yield spread is further supportive of the ongoing slide in the USD/CAD pair. 

However, the ongoing slump in crude oil prices has been the key factor weighing on the commodity-linked currency - Loonie, and is restricting any sharp downfall for the major. Oil prices are currently trading below $41.00 handle, at over three-month low on renewed worries over global supply glut. 

Going forward, rebound in crude oil prices should extend support to the Canadian Dollar, which would eventually accelerate the slide for the USD/CAD pair. Even from a technical perspective, the pair has just managed to hold its neck above 200-day SMA support near 1.3100-1.3080 region, which if broken might trigger a fresh leg of weakness in the near-term.