USD/CAD clings to recovery gains, above 1.28 mark ahead of US data

   •  Trade war fears boost USD’s safe-haven appeal against perceived riskier currencies.
   •  Bearish oil prices further weigh on Loonie and collaborate to the recovery move.
   •  US ADP report/ISM PMI/weekly oil inventories data to provide some fresh impetus.

The USD/CAD pair reversed an early dip to over 1-month lows and recovered over 65-pips from an intraday low level of 1.2775.

Fears about a full-blown US-China trade war escalated on Wednesday after China retaliated by imposing tariffs on $50bn of US imports. The move came after the Trump administration, on Tuesday, announced 25% tariffs on $50 billion of annual imports from China. 

Reviving trade tensions triggered a fresh wave of global risk-aversion trade and underpinned the US Dollar's safe-haven appeal against its Canadian counterpart. This coupled with a follow-through weakness in crude oil prices dented demand for the commodity-linked currency - Loonie and further collaborated to the pair's rebound back closer to mid-1.2800s.

Further gains now seemed capped as traders refrained from placing aggressive bets ahead of today's US economic releases, which includes ADP report on private sector employment and ISM non-manufacturing PMI.

Apart from the US macro data, the weekly EIA US crude oil inventories data might influence the oil price dynamics and help traders grab some short-term opportunities.

Technical levels to watch

On a sustained move beyond 1.2850-60 area, the pair is likely to dart towards reclaiming the 1.2900 handle before heading back towards challenging the 1.2940-50 supply zone. On the flip side, weakness back below the 1.2800 handle, leading to a subsequent drop below 1.2775 level, is likely to accelerate the slide towards 50-day SMA support near the 1.2730-25 region en-route the 1.2700 handle.