USD/CAD clings to gains above 1.25 handle amid notable USD demand

The USD/CAD pair caught some fresh bids on Wednesday and built on previous session's recovery move from 4-week lows.

The pair's recovery on Tuesday was supported by disappointing Canadian data, showing a larger than expected drop in industrial production price index (IPPI) and continuous drop in raw materials price index (RMPI). The recovery move got an additional boost from a broad based greenback recovery. 

Meanwhile, easing N. Korean tensions, coupled with a modest uptick in the US Treasury bond yields helped the US Dollar Index to extend overnight sharp recovery from over 2-1/2 year lows and was seen driving the pair higher on Wednesday.

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Adding to this, a softer tone around crude oil prices further weighed on the commodity-linked currency - Loonie, and also collaborated to the pair's up-move through early European session. 

Today's US economic docket features the release of ADP report and the first revision of GDP print, while from Canada the release of current account balance would now be looked upon for some fresh impetus later during the NA session. 

Technical levels to watch

Immediate resistance is pegged near mid-1.2500s, above which a fresh bout of short-covering could lift the pair beyond the 1.2600 handle towards its next resistance near 1.2620 level.

On the flip side, the 1.25 handle now becomes an immediate support to defend, which if broken could accelerate the slide back towards 1.2445-40 intermediate support en-route multi-month lows support near the 1.2415-10 region, touched in July.