USD/CAD recovery from 3-week lows falters near 1.26 handle

The USD/CAD pair extended overnight recovery move from three-week lows but continued with its struggle to move back above the 1.2600 handle. 

On Tuesday, the pair dropped to 1.2525 level, the lowest level since August 1, following the release of mixed Canadian retail sales figures. According to the report, Canadian headline retail sales witnessed a slightly weaker than expected growth of 0.1% in June, while excluding automobiles, sales recorded above expected 0.7% monthly gains. 

The pair, however, quickly rebounded from lower level amid stronger US Dollar recovery across the board and finally managed to settle in the neutral territory around the 1.2560-65 region. 

With investors looking past Tuesday's Canadian macro data, a modest pullback in crude oil prices, which tends to dampen demand for the commodity-linked currency - Loonie, helped the pair to extend the recovery move through early European session on Wednesday. 

In absence of any strong follow through greenback buying interest, the pair remained capped below the 1.2600 handle and has now retreated around 20-pips from session tops. 

Today's US economic docket features the release of new home sales, followed by the release of US crude oil inventories data and would be looked upon for some fresh impetus later during the NA session.

Technical levels to watch

On a sustained move beyond the 1.2600 handle, the pair is likely to accelerate the up-move towards 1.2640-45 resistance before eventually darting towards the 1.2700 handle. 

On the downside, mid-1.2500s remains an immediate support to defend, which if broken would turn the pair vulnerable to break below multi-week lows support near the 1.2525 region and head towards testing the key 1.2500 psychological mark.