USD/CAD technical analysis: Hits three-month low, focus on Canadian election results

• USD/CAD is looking south, having breached key support on Monday. 
• Canadian election results may have little or no impact on underlying trending in the CAD.

USD/CAD is currently trading at 1.3078, the lowest level since July 22, representing a 0.20% loss on the day. 

The pair closed well below 1.3134 (Sept. 10 low) on Monday, bolstering the bearish setup, as represented by the lower highs, lower lows created since Oct. 10, a below-50 reading on the relative strength index and the downward sloping 5- and 10-day moving averages. 

As a result, a deeper drop to 1.3050 could be in the offing. 

Canadian elections a non-event?

Prime Minister Trudeau's Liberals and the main opposition Conservatives led by Andrew Scheer are in a neck-and-neck race, according to opinion polls and observers believe markets are underpricing the possibility of a minority government. 

That said, historically Federal elections do not appear to have had a significant impact on the underlying trend in the CAD, according to Scotiabank's Shaun Osborne. 

The CAD, therefore, may continue to gain ground, as suggested by technical charts, especially with the easing of US-China trade tensions. 

The bearish technical outlook would be invalidated if the USD/CAD pair posts a convincing daily close above 1.3134. 

Daily chart

Trend: Bearish

Technical levels