USD/CAD extends recovery move further beyond 1.29 mark

The USD/CAD pair extended its recovery move beyond the 1.2900 handle and has now recovered around 50% of Friday's steep losses to 10-month lows.

Currently placed at session tops near the 1.2925 region, the pair's latest leg of up-move could be attributed to renewed weakness in oil prices. In fact, WTI crude oil has now dropped below $44.00/barrel mark to fresh multi-day lows and was seen weighing on the commodity-linked currency - Loonie.

   •  WTI resumes declines, hits fresh 8-day lows sub $ 44 mark

Adding to this, a modest pick up in the greenback demand, with the key US Dollar Index now eyeing to reclaim the 96.00 handle, further collaborated to the pair's up-move through early NA session. 

A duo of positive factors also seems to have prompted traders to take some profits off their bearish positions, especially after the pair's recent slump of over 400-pips over the past two weeks.

It, however, remains to be seen if the pair is able to build on the up-move or the current pull-back is solely led by short-covering amid growing prospects of a BoC rate hike action, sooner rather than later.

   •  BoC likely to raise interest rates - BBH

Technical levels to watch

A follow-through buying interest now seems to confront resistance near 1.2950-60 area, above which a fresh bout of short-covering could lift the pair back towards the key 1.30 psychological mark.

On the downside, retracement back below the 1.2900 handle might now find immediate support near 1.2875 level, which if broken would turn the pair vulnerable to break below multi-month lows support near mid-1.2800s and head towards testing its next support near 1.2820-15 region.