USD/CAD headed back to 1.2900 as oil recovers

As oil recovery gained momentum, the USD/CAD pair failed to build on to its early rebound from 1.2900 level and reversed from 1.2945 region to currently trade around 1.2920 level.

On Thursday, the pair witnessed a volatile session, trimming majority of its sharp up-move to 1.3100 neighborhood to finally settle below 1.3000 psychological mark. Earlier on Thursday, the US Dollar continued strengthening as surprisingly strong Philly Fed Manufacturing index negated weak inflation and higher-than-expected weekly jobless claims data.

On Friday, broad US Dollar weakness accompanied by rebounding oil prices is seen extending support to the Canadian Dollar, dragging the USD/CAD pair lower. 

Moving forward, investors now shift their focus to the Canadian May CPI number, which is expected to have risen 0.3% on monthly basis while the annual rate is expected to decline to 1.6% from 1.7%. Traders will also have the opportunity to evaluate the recovery trend in the US housing market from today's releases of building permits and housing starts data.

Technical levels to watch

Weakness below 1.2900 round figure mark is likely to get extended towards 1.2850-45 horizontal support, which if broken is likely to expose 1.2800 handle ahead of 1.2765-60 support area. On the flip side, recovery momentum above 1.2960-70 is likely to assist the pair to surpass 1.3000 psychological mark and head towards 1.3030 resistance area. Any further up-move beyond 1.3030 resistance might continue to confront strong resistance around 1.3100 region.