USD/CAD clings to tepid recovery gains, still below mid-1.2600s

The USD/CAD pair built on its modest recovery move from sub-1.2600s level and recovered part of previous session's steep losses to fresh 14-month lows.

The US Dollar seems to have found some buying interest at lower levels, helped by a minor uptick in the US Treasury bond yields and has been one of the key factors of the pair's modest recovery from the lowest level since May 2016 touched yesterday.

Against the backdrop of yesterday's bearish API inventories data, an announcement by Ecuador’s Oil Minister Carlos Perez that it won’t be able to honor the OPEC oil output cut deal seems to have dented sentiment around the oil markets. 

Hence, a mildly weaker tone around crude oil prices was further seen weighing on the commodity-linked currency - Loonie and remained supportive of the pair's uptick through early European session on Wednesday.

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It, however, remains to be seen if the pair is able to build on the recovery move amid growing doubts over the US President Donald Trump's ability to deliver on his promised pro-growth agenda.

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Later during the NA session, the release of housing market data from the US and Canadian manufacturing sales data would now be looked upon for some fresh trading impetus. 

Technical levels to watch

From current levels, sustained move beyond mid-1.2600s could get extended towards the 1.2700 handle, above which the pair is likely to accelerate the recovery towards 1.2760-70 horizontal resistance. 

On the flip side, the 1.2600 handle now becomes an immediate strong support to defend, which if broken would turn the pair vulnerable to extend the slide further, initially towards an intermediate support near mid-1.2500s ahead of the key 1.25 psychological mark.