USD/CAD tracks oil recovery, drops below 1.2950

Tracking a sharp slide in crude oil prices on Monday, the USD/CAD pair moved above 1.3000 key psychological level but faded back below mid-point of 1.3000-1.2900 level on Tuesday.

Renewed worries over supply glut continues to cap near-term upside for crude, shrugging off disruption fears on the back of the Canadian wildfires that have taken more than 2 million barrels a day of production out of the market. The correlation between the USD/CAD pair and crude oil prices remains high and as crude oil witnesses a minor recovery on Tuesday, the USD/CAD pair has turned lower to currently trade at the low point of the day, near 1.2930 level.

The 1.3000 handle has now turned a significant important resistance as it did on the way down, as an important support. Hence, a follow through selling pressure, led by further recovery in crude oil prices, might trigger some near-term corrective move for the pair.

Technical levels to watch

Below 1.2900 round figure mark, the pair seems to find immediate support at a short-term descending trend-channel resistance break-point near 1.2850-45 area. On a subsequent weakness below 1.2850 support, the pair could be headed back to retest 1.2820-1.2800 handle support.

On the upside, 1.3000 psychological mark remains key resistance to conquer. On a sustained break through this key resistance area, the pair seems set to extend its near-term recovery trend towards testing its next major resistance near 1.3135-40 zone (April daily closing highs resistance), with intermediate resistance near 1.3090-1.3100 round figure mark.