USD/CAD bounces off 2-1/2 month lows ahead of US macro data

The USD/CAD pair continued with its ongoing slump and tumbled to its lowest level since late Feb., just below the 1.3200 handle. 

Spot remained heavily offered since the beginning of this week and extended last week's reversal move from levels beyond the key 1.35 psychological mark. Tuesday's comments from the BoC Governor Stephen Poloz echoed Deputy Governor Carolyn Wilkins' hawkish rhetoric on Monday and clearly indicated that a rate hike could on the table, sooner rather than later. 

Meanwhile, the high degree of correlation between oil prices and the commodity-linked currency - Loonie, seems to have taken a back-seat, with the latest BoC headlines acting as an exclusive driver of the pair's sharp slide over the past three trading sessions. 

With today's drop, the pair dropped in excess of 300-pips since last Friday and hence, repositioning trade, ahead of important US macro data and the highly anticipated FOMC decision, helped the pair to recover over 30-pips from near-term oversold conditions. 

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Currently trading around 1.3220 region, traders now look forward to today's US economic docket, features the release of latest CPI print and monthly retail sales data, for some fresh trading impetus. 

   •  US: CPI inflation expected to slip to 1.9% y/y in May - TDS

Technical levels to watch

Any further recovery is likely to confront resistance near 1.3240 level, above which a fresh bout of short-covering could lift the pair back towards the 1.3300 handle en-route 1.3335-40 resistance area. On the flip side, follow through selling interest below the 1.3200 handle is likely to accelerate the slide towards 1.3145 horizontal support before the pair eventually drops to test the 1.31 round figure mark.