• CAD rallies after Canadian govt. announces to backstop Kinder Morgan.
• A modest USD retracement/weaker US bond yields add to the pressure.
The USD/CAD pair finally broke down of its consolidative range and tumbled to the 1.2800 handle, reversing all of the previous session's up-move.
The Canadian Dollar rallied hard, with the pair witnessing a sudden drop of over 50-pips in the last hour after the Canadian government showed readiness to take the extraordinary step of reimbursing Kinder Morgan for any financial losses if it proceeds with the expansion of an oil pipeline to the Pacific.
Adding to this, a modest US Dollar retracement, what could be termed as a delayed reaction to today's mixed US housing market data, further collaborated to the pair's steep decline during the early NA session.
Meanwhile, traders seemed to have largely ignored the ongoing retracement slide in crude oil prices, which tends to dent demand for the commodity-linked currency - Loonie, with possibilities of some short-term trading stops being triggered below 50-day SMA support near the 1.2835-30 region aggravating the selling pressure.
Next of relevance would be the release of EIA's US weekly crude oil inventories data, which could have a significant impact on oil prices and eventually provide some meaningful impetus.
Technical levels to watch
A follow-through weakness could further get extended towards the 1.2770-65 horizontal support, which if broken might turn the pair vulnerable to test 100-day SMA support near the 1.2690 region.
On the upside, momentum back above the 1.2830-35 region might continue to confront fresh supply near the 1.2870-75 area and is closely followed by a strong resistance marked by the 1.2900 handle.