USD/CAD erase early gains, drops to fresh session low

The USD/CAD pair once again failed to sustain above the 1.3400 handle and has now reversed majority of daily gains.

Currently trading around 1.3375-70 band, testing session lows, the ongoing retracement in the US treasury bond yields failed to assist the US Dollar Index to build on early gains and the pair to extend its recent upward trajectory further beyond 1.3415 level. 

Meanwhile, negative trading sentiment around oil markets, with WTI crude oil sliding further below the $53.00/barrel mark, which tends to drive demand for the commodity-linked currency - Loonie, seems to be lending some immediate support to the major.

Against the backdrop of growing bets for an eventual Fed rate-hike action in mid-March, downbeat oil prices might collaborate towards limiting any sharp downslide for the major. However, possibilities of some additional profit taking, following the pair's recent up-surge of over 200-pips, could keep the pair suppressed in absence of any major market moving economic releases on Monday.

Technical levels to watch

A follow through retracement below 1.3370 area (Friday’s low) is likely to accelerate the slide further towards 1.3315 strong horizontal support, with some intermediate support near mid-1.3300s.

On the flip side, sustained strength above 1.3400 handle, leading to a subsequent momentum above session peak resistance near 1.3415 level, now seems to lift the pair beyond 1.3440 intermediate resistance (Friday’s high) towards testing its next major hurdle near 1.3500 psychological mark.