USD/CAD struggling to register any meaningful recovery from 10-month lows

The USD/CAD pair has been struggling to register any meaningful recovery and remained close to 10-month lows touched on Friday.

On Monday, the pair faded early recovery gains to 1.2933 level and finally settled with only marginal gains. With the US Dollar consolidating post-NFP up-move, a sharp recovery in oil prices extended support to the commodity-linked currency - Loonie and failed to assist the pair to build on early up-move.

The pair maintained its correlation with crude oil prices and hence, a follow-through buying interest around oil markets was seen keeping a lid on the pair's recovery move through early European session on Tuesday.

Meanwhile, the Canadian Dollar remains supported by increasing expectations that the Bank of Canada would consider raising interest rates, sooner rather than later, as the domestic economy continues to expand rapidly. Hence, any near-term recovery could be solely led by short-covering amid near-term oversold conditions.

Later during the day, second-tier US economic data - JOLTS Job Openings and Final Wholesale Inventories, along with Canadian Housing Starts data would be looked upon for some short-term trading opportunities. However, major focus would be on Wednesday's key events - BoC monetary policy decision and the Fed Chair Janet Yellen's testimony, which would help determine the next leg of directional move for the major.

   •  Long USD/CAD for target of 1.32 – Deutsche Bank

Technical levels to watch

Immediate support is pegged near 1.2870 region, which if broken is likely to accelerate the slide towards 1.2830-25 horizontal support en-route the 1.2800 round figure mark. On the flip side, any recovery move might continue to confront some fresh supply near 1.2930-35 region, above which a bout of short-covering could lift the pair back towards the key 1.30 psychological mark.