USD/CAD bounces off lows, still deep in the red around mid-1.2300s

The USD/CAD pair extended its bearish break below the 1.2400 handle and touched a 4-month low in the last hour, albeit quickly recovered around 30-35 pips thereafter.

The US Dollar took a sharp knock during the European trading session after the US Treasury Secretary Steven Mnuchin, that he favoured a weaker currency to support US exports, suggested that authorities would actively seek out and encourage a lower USD. 

Adding to this, a modest uptick in crude oil prices provided an additional boost to the commodity-linked currency - Loonie and further collaborated to the pair's sharp slump on Wednesday. 

The selling pressure, however, seems to have abated, at least for the time being, with the finding some decent support near the 1.2320 region. 

Meanwhile, the market seems to have largely negated comments by the US Commerce Secretary Wilbur Ross, while speaking to CNBC, saying that he sees a good change on NAFTA renegotiation. 

Currently trading around mid-1.2300s, traders now look forward to the EIA's weekly US oil inventories data for some fresh trading impetus.

Technical levels to watch

Any subsequent recovery move is likely to confront resistance near the 1.2380-85 region, above which the pair is likely to move past the 1.2400 handle and head towards testing the 1.2425-30 supply zone.

On the flip side, the 1.2320 level now seems to have emerged as immediate support and is closely followed by the 1.2300 handle, which if broken might now pave the way for an extension of the pair’s downward trajectory.