USD/CAD slammed below 1.2900 as oil gains traction

Despite of upbeat US economic data and disappointing Canadian housing data, the USD/CAD pair remained well offered and has now dropped below 1.2900 handle to currently trade near session low level around 1.2890-95 band.

The pair on Wednesday once again failed to sustain its move above 100-day SMA strong resistance and reversed sharply. The pair is seen extending the reversal on Thursday as buoyant crude oil prices is boosting demand for the commodity-linked currency, Loonie.

Investors now look forward to the official EIA data on weekly US crude oil inventories, which is expected to show a decline of 2.1 million barrels in domestic crude oil supplies. A large divergence from the expected drawdown is likely to infuse volatile moves in crude oil prices and eventually drive the USD/CAD major.

However, near-term direction for the USD/CAD pair could be determined after the release of Friday’s crucial NFP data. 

Technical levels to watch

On the immediate downside, 1.2850-45 horizontal area remains immediate support to defend. Failure to hold this immediate support should accelerate the slide immediately towards 1.2800 round figure mark support. On the flip side, recovery momentum back above 50-day SMA, support turned resistance near 1.2940 region, is likely to get extended immediately towards the very important 100-day SMA strong resistance. A decisive break above 100-day SMA resistance now seems to trigger a sharp short-covering rally that would pave way for further near-term appreciating move for the pair.