USD/CAD ticks above 1.24 handle on softer data, BOC in focus

The USD/CAD pair held on to its modest recovery gains and peeped through the 1.2400 handle during early NA session.

The pair's uptick from over 2-year lows got a minor lift from today's weaker than expected Canadian trade balance and labor productivity data. According to the data released, Canada July international merchandise trade deficit shrank to $3.04 billion in July, from previous month's $3.76 billion and better-than $3.10 billion expected. The disappointment, however, came from a sharp drop in imports and exports, which eventually weighed on the Canadian Dollar. 

Adding to this, Canada Q2 labor productivity unexpectedly dropped by 0.1% in the second quarter of 2017, worse than a growth of 0.9% expected, and the previous monthly reading was also revised a bit lower to 1.3% as from 1.4% reported earlier. 

Meanwhile, the US trade balance data came in slightly better-than-expected and showed a deficit of $43.7 billion for July as compared to previous month's $43.6 billion and $44.6 billion expected, but did little to provide any meaningful lift to the US Dollar. 

The pair's bullish uptick, however, seemed lacking strong conviction amid strong bullish sentiment around oil markets, which was seen benefitting the commodity-linked currency - Loonie. In fact, WTI crude oil prices surged through the $49.00 handle during early NA session and kept a lid on any further up-move for the major. 

Investors also seemed to refrain from initiating any aggressive bets ahead of the next key event risk - BOC monetary policy decision, due to be announce in a short while from now.

   •  BoC to leave rates unchanged – TDS

Technical levels to watch

A follow through momentum beyond the 1.2425-30 region might trigger a short-covering rally and lift the pair towards reclaiming the key 1.25 psychological mark. On the downside, 1.2380 level now becomes immediate support to defend, which if broken might turn the pair vulnerable to retest 1.2340 intermediate support before eventually dropping to the 1.2300 handle.