USD/CAD corrects from 3-week highs, comes down to 1.2655

After yesterday's pull-back from three-week highs, the USD/CAD pair now seems to have entered a consolidation phase and oscillated within 20-25 pips narrow trading range just above mid-1.2600s.

At the start of a new trading week, the pair built on its recent recovery move from 25-month lows and continued gaining traction for the sixth consecutive session. Friday's upbeat US jobs report supported the US Dollar demand, which a pullback in oil prices was seen weighing on the commodity-linked currency - Loonie and eventually lifted the pair beyond the 1.2700 handle for the first time since mid-July. 

The pair, however, failed to build on the up-move and was being weighed down by some renewed greenback selling bias following dovish remarks by the Fed's Kashkari and Bullard. Markets even shrugged off a mildly weaker tone around crude oil prices, with persistent USD weakness acting as an exclusive driver of the pair's movement through early European session on Tuesday.

Today's economic docket features the release of US JOLTS Job Openings and Canadian housing starts, which would be looked upon for some short-term trading impetus later during the NA session.

Technical levels to watch

Momentum back above the 1.2690-1.2700 region now seems to pave way for extension of the pair's recovery move towards mid-1.2700s ahead of the 1.2800 handle. On the flip side, retracement below 1.2635-30 zone would turn the pair vulnerable to drift back below the 1.26 mark towards its next support near the 1.2565-60 region.