USD/CAD bounces off 6-week lows, retakes 1.26 handle

   •  Hawkish FOMC minutes/easing geopolitical tensions revive USD demand.
   •  A modest retracement in oil prices undermines Loonie and support uptick.

The USD/CAD pair staged a modest recovery on Thursday and bounced back to the 1.2600 handle during the early European session.

A strong upsurge in crude oil prices, led by escalating geopolitical tensions, underpinned the commodity-linked currency - Loonie, which along with persistent US Dollar selling and continued dragging the pair lower on Wednesday.

The pair slipped for the third consecutive session, marking the sixth day of decline in the previous seven, and fell to an intraday low level of 1.2545, the lowest level since Feb. 19, albeit found some following the release of hawkish FOMC meeting minutes.

Meanwhile, easing concerns over an immediate US military strike on Syria, coupled with a modest retracement in oil prices now seems to have prompted traders to lighten their bearish bets, especially after a sharp fall of over 200-pips since the beginning of this year. 

Moving ahead, traders now look forward to the second-tier economic data - the usual US weekly initial jobless claims and Canadian New Housing Price Index (NHPI), in order to grab some short-term trading opportunities.

Technical levels to watch

Any subsequent recovery is likely to confront resistance at the very important 200-day SMA, near the 1.2630 region, above which a fresh bout of short-covering could lift the pair back towards the 1.2700 handle (100-day SMA).

On the flip side, weakness back below 1.2575-70 area might now turn the pair vulnerable to break below the 1.2550 intermediate support and extend its downfall further towards challenging the key 1.2500 psychological mark.