USD/CAD off highs, still comfortable above 1.25 mark

The USD/CAD pair continued gaining some positive traction for the third consecutive session on Tuesday and jumped to the highest level since August 31.

Currently placed comfortably above the key 1.25 psychological mark, the pair continues to benefit from persistent US Dollar buying interest, which remains supported by surging US Treasury bond yields on growing prospects for additional Fed rate hike action in 2017.

Adding to this, a sharp overnight corrective slide in crude oil prices further weighed on the commodity-linked currency and collaborated to the bid tone surrounding the major.

Meanwhile, the up-move seemed lacking strong follow through momentum, with the pair retreating few pips from session tops amid a modest rebound in oil prices. 

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Against the backdrop of Monday's upbeat US ISM manufacturing PMI, renewed optimism over the US President Donald Trump's tax reform plans might now limit any immediate sharp downside, at least for the time being.

Hence, extension of the pair's near-term upward trajectory, led by some technical buying after last week's bullish break above 50-day SMA, remains a distinct possibility.

Technical levels to watch

Bulls would be eyeing for a follow through buying interest beyond mid-1.2500s, above which the pair seems all set to surpass the 1.2600 handle and aim towards testing its next hurdle near the 1.2620-25 region. 

On the downside, weakness back below the 1.25 handle now seems to find strong support near the 1.2460 region (50-day SMA) and any subsequent fall below the mentioned support might now be limited by a strong horizontal support near the 1.2425-20 region.