USD/CAD struggles to defend 1.37 handle

The USD/CAD pair ran through some fresh offers at session tops near 1.3730-35 region and has now reversed all of its gains posted in the previous session.

A goodish recovery in oil prices, with WTI crude oil trading with gains in excess of 1.0%, boosted demand for the commodity-linked currency - Loonie, and was seen weighing on the major.

This coupled with a sharp slide in the US treasury bond yields failed to help the US Dollar to extend its recovery move and further collaborated to the pair's slide back below the 1.3700 handle. 

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Currently trading around 1.3690-95 band region, the pair seems to have found some support from a higher-than-expected jump in import price index that showed the price of imported goods and services rose 0.5% m-o-m in April. The yearly rate, however, dipped to 4.1% during the recorded period but got negated by an upward revision for March reading. 

Today's data clearly reflected continuing inflationary pressure in the US economy and hence, investors now look forward to Friday's headline inflation figures (part of the Fed's dual mandate) to support the case for a gradual Fed rate tightening cycle through 2017.

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Technical levels to watch

A follow through selling pressure has the potential to drag the pair towards 1.3640 support, which if broken would expose the 1.3600 handle ahead of its next support near 1.3575-70 region.

On the flip side, momentum above 1.3730-35 (session tops) is likely to confront resistance near 1.3750 level, above which the pair is likely to aim toward reclaiming the 1.3800 handle before eventually heading towards its next hurdle near 1.3855-60 area.