USD/CAD erodes part of yesterday’s tepid recovery gains

The USD/CAD pair failed to build on previous session's recovery move further beyond the key 1.30 psychological mark and held closer to 5-month lows touched last Friday.

Currently trading around 1.2980-75 region, testing session lows, the pair lacked any strong follow through momentum amid subdued greenback action. In fact, the US Dollar Index stalled its recent recovery move near the 96.00 handle and is eventually weighing on the major.

   •  US Dollar off highs, back near 95.80

Even a minor retracement in crude oil prices, which drives demand for the commodity-linked currency - Loonie, did little to extend any immediate support, albeit might collaborate towards limiting further downside, at least for the time being. 

Looking at the broader picture, the pair now seems to have entered a bearish consolidation phase following its recent slump of 600-pips over the past four weeks and look forward to this week's important event risks - FOMC meeting minutes and the keenly watched NFP, in order to determine the next leg of directional move. 

Technical levels to watch

Immediate support is pegged near 1.2965 level, below which the pair is likely to extend the recent depreciating move further towards 1.2925-20 intermediate support ahead of the 1.2900 handle.

On the upside, sustained recovery beyond the 1.30 handle is likely to trigger a short-covering rally towards 1.3065-70 horizontal resistance en-route the 1.3100 handle.