USD/CAD extends tepid recovery move beyond 1.26 handle

The USD/CAD pair gained some traction on Thursday and is currently placed at session tops near 1.2625 region, reversing previous session's slide back to 14-month lows.

The pair on Wednesday dropped back to its lowest level since the first week of May 2016 despite upbeat US housing market data, which to some extent was negated by better-than-expected Canadian manufacturing sales data. 

A strong rally in crude oil prices, led by the weekly EIA report that showed a larger than expected drawdown in the US oil inventories, boosted the commodity-linked currency - Loonie and weighed on the major.

With oil prices entering a bullish consolidation phase, a modest pick-up in the US Dollar demand was seen driving the pair higher on Thursday. It, however, remains to be seen if the pair once again fizzles out at higher levels or is able to sustain/build on the tepid recovery gains amid near-term oversold conditions. 

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Today's US economic docket features the release of weekly jobless claims, Philly Fed manufacturing index and CB's leading index. In absence of any macro data from Canada, the USD price dynamics is likely to act as an exclusive driver of the pair's movement on Thursday.

Technical levels to watch

Immediate resistance is pegged near 1.2640-50 region, above which a bout of short-covering could lift the pair back towards the 1.2700 handle. A follow through buying interest has the potential to continue lifting the pair further towards its next major hurdle near 1.2760-65 area. 

On the flip side, sustained weakness below the 1.2600 handle, leading to a subsequent break below 1.2580 level, would confirm a fresh bearish breakout and turn the pair vulnerable to extend the ongoing downfall towards the key 1.25 psychological mark with some intermediate support near 1.2530-25 region.