USD/CAD recovery remains capped near 1.30 handle

After yesterday's sharp reversal from weekly highs, the USD/CAD pair regained traction and traded with a positive bias for the second consecutive session, albeit remained capped below the key 1.30 psychological mark.

The pair on Wednesday failed to sustain its recovery gains beyond the 1.30 mark and retreated sharply after the highly anticipated FOMC meeting minutes revealed that policymakers were still divided over the timing of balance sheet reduction. Meanwhile, a sell-off in crude oil prices on news of Russia's opposition to deeper oil production cuts was seen weighing on the commodity-linked currency - Loonie, and helped the pair to end the day with modest gains. 

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On Thursday, a modest pick up in the US Dollar demand, despite retracing US Treasury bond yields, seems to have negated a minor recovery in oil prices and was seen lending some support to the pair. The pair, however, lacked any strong momentum and remained capped below the 1.30 handle as investors look forward to the release of today's important macro data.

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The US economic docket features the release of ADP report, trade balance data and ISM non-manufacturing PMI, while from Canada the release of trade balance data and building permits would be looked upon for fresh impetus.

Technical levels to watch

Immediate strong resistance remains near the 1.30 mark and a sustained move above this might trigger a short-covering rally towards 1.3065 horizontal level before the pair aims to reclaim the 1.3100 handle.

On the flip side, 1.2935-30 region is likely to protect the immediate downside, which if broken is likely to accelerate the slide towards the 1.2900 handle en-route its next major support near 1.2855-50 region.