USD/CAD consolidates near two-month tops, above 1.26 handle

The USD/CAD pair oscillated within 20-25 pips narrow trading range and was seen consolidating last week's strong gains to near two-month tops. 

On Friday, the Canadian Dollar fell sharply against its US counterpart following the release of subdued inflation and retail sales data from Canada. Adding to this, growing expectation that the US tax reform will be passed sooner-rather-than later provided an additional boost to the already stronger US Dollar and helped the pair to reclaim the 1.2600 handle for the first time since late August. 

With the greenback holding on to its last week's strong gains, a modest pickup in crude oil prices underpinned demand for the commodity-linked currency - Loonie and has failed to provide any fresh bullish impetus to the major. 

From a technical perspective, the pair on Friday broke through an important barrier and hence, a follow through momentum, towards 100-day SMA hurdle, now seems a distinct possibility amid empty economic docket on Monday.

Technical levels to watch

A follow through buying interest has the potential to lift the pair towards 1.2670 area (100-day SMA), above which the up-move could get extended event beyond the 1.2700 handle towards its next major hurdle near the 1.2750-55 region. 

On the flip side, the 1.2600 handle now becomes immediate support to defend, which if broken might trigger a corrective slide towards 1.2565-60 intermediate support en-route the key 1.25 psychological mark.