USD/CAD trims tepid recovery gains, but holds above 1.26 mark

The USD/CAD pair trimmed some of its tepid recovery gains and retreated around 20-25-pips from session tops near the 1.2640 region.

The prevalent bullish sentiment around oil markets, with WTI crude oil holding with gains near monthly highs around mid-$47.00s, underpinned the commodity-linked currency - Loonie and was seen weighing on the major.

Despite the pullback, the pair has held with modest gains near 1.2615 level and was being supported by a strong greenback recovery move. In fact, the key US Dollar Index is now placed at session tops just below the key 95.00 psychological mark and has helped the pair to hold above the 1.2600 handle, at least for the time being. 

With diverging factors failing to provide any firm directional impetus, the pair seems more likely to enter a consolidation phase amid near-term oversold conditions. 

Up next would be the second-tier US economic data, which is unlikely to be a major game changer but would still be looked upon for some short-term trading opportunities.

Technical levels to watch

Bears would be eyeing for a decisive break through the 1.2600-1.2580 region, below which the pair is likely to extend the near-term bearish trajectory towards 1.2535-30 intermediate support en-route the key 1.25 psychological mark.

On the flip side, sustained recovery above 1.2650 level might trigger a short-covering rally towards the 1.2700 handle. The recovery momentum could further get extended towards 1.2760-65 strong horizontal hurdle.