USD/CAD weakens further below 1.30 handle as FOMC looms

   •  A modest USD weakness/NAFTA optimism prompts some aggressive long-unwinding trade.
   •  Bullish oil prices provide an additional boost to Loonie and contribute to the downfall.
   •  The key FOMC announcement would be looked upon for some fresh directional impetus.

The USD/CAD pair extended its retracement slide from 9-month lows and weakened farther below the key 1.3000 psychological mark.

The pair's early European session recovery attempts met with some fresh supply near mid-1.3000s, with a fresh wave of US Dollar selling pressure prompting some aggressive long-unwinding trade.

Meanwhile, optimism over the NAFTA negotiations, further reinforced by the Canadian PM Justin Trudeau's comments to get a good deal, provided an additional boost to the Canadian Dollar.

This coupled with the prevailing bullish sentiment around crude oil prices, which tends to underpin the commodity-linked currency - Loonie further collaborated to the pair's heavy offered tone through the early NA session.

It would now be interesting to see if the pair is able to find some dip-buying interest or bears maintain their dominant position as investors keenly await the latest monetary policy update by the US Federal Reserve.

Apart from the highly anticipated FOMC decision, this week's important Canadian macro releases - consumer inflation figures and monthly retail sales, might also influence the pair's momentum in the near-term.

Technical levels to watch

A follow-through weakness below the 1.2960-50 region is likely to get extended towards the 1.2920-10 area before the pair eventually drops back to retest the 1.2870-60 support.

On the upside, any recovery attempts back above the 1.30 handle now seem to confront fresh supply near mid-1.3000s, above which the pair could make a fresh attempt to reclaim the 1.3100 handle.