USD/CAD recovers from 2-year lows, around 1.24 mark ahead of BOC

The USD/CAD pair caught some fresh bids on Wednesday and extended overnight modest rebound from fresh 2-year lows.

Against the backdrop of escalating geopolitical tensions around the Korean peninsula, Tuesday's speeches from various Fed officials raised doubt over the likelihood of another Fed rate hike action by the end of this year and triggered a fresh wave of US Dollar sell-off on Tuesday. 

This coupled with a strong up-move in crude oil prices provided an additional boost the commodity-linked currency - Loonie and further collaborated to the pair's slide to its lowest level since June 2015. 

With oil prices entering a bullish consolidation phase, a modest USD uptick on Wednesday helped the pair to recover back to the 1.2400 neighborhood. 

Moreover, traders also seemed inclined to lighten their positions ahead of the BoC monetary policy decision, due to be announced later during the NA session. Hence, a follow through short-covering, even beyond weekly highs resistance near the 1.2425 region, now seems a distinct possibility.

Ahead of the key event risk, trade balance data from the US and Canada, would also be looked upon to grab some short-term trading opportunities, while the release of US ISM non-manufacturing PMI might be overshadowed by the post-BoC action. 

   •  US ISM non-manufacturing and BoC rate decision in focus – Danske Bank

Technical levels to watch

On a sustained recovery beyond 1.2420-25 area, the pair is likely to extend the recovery move towards 1.2455-60 horizontal resistance en-route the 1.25 psychological mark.

On the flip side, renewed weakness below 1.2360 level would turn the pair vulnerable to extend its near-term bearish trajectory towards the 1.2300 handle.