USD/CAD jumps back above 1.2900 handle as oil extends slide

A sharp slide in WTI crude oil prices is weighing on the Canadian Dollar and assisting the USD/CAD pair to extend its recovery trend and reclaim 1.2900 handle.

On Monday, the pair dropped for fifth consecutive day despite of a slide in crude oil prices and cautious stance from BoC’s Business Outlook Survey. Monday's slide could be attributed to the broad selling pressure surrounding the greenback and was led by risk-on sentiment around equity markets amid thin liquidity conditions on the back of a holiday in the US markets.

On Tuesday, the pair seems to gain traction as global risk aversion reemerges on uncertainty surrounding the economic implication of the historic Brexit referendum. Next in tap from the US would be Factory Orders data on Tuesday ahead of FOMC meeting minutes on Wednesday, which might now act as immediate fundamental trigger for the US Dollar's near-term direction.

Technical levels to watch

On a sustained trade above 1.2900 handle, the pair could be headed back towards 50-day SMA support break-point, now turned resistance, near 1.2935 region. A follow through buying interest beyond 1.2970 horizontal resistance has the potential to boost the pair beyond 1.3000 psychological mark resistance, towards testing its next major resistance near 1.3030 region marked by the very important 100-day SMA.

On the flip side, 1.2845-40 area now seems to protect immediate downside, below which the pair could immediately slide to 1.2800 round figure mark, representing a short-term ascending trend-line support. Failure to bounce-off the ascending trend-line support near 1.2800 mark now seems to open room for further selling pressure that could drag the pair back towards 1.2735-30 horizontal support.