USD/CAD jumps to 1.26 neighborhood ahead of Canadian retail sales

The USD/CAD pair finally broke out of the Asian/early European session consolidation phase and refreshed session tops, around the 1.2600 handle in the past hour.

Cautious trade, ahead of the Jackson Hole Symposium due to begin on Thursday, seems to have prompted traders to unwind bearish USD bets. Hence, a goodish US Dollar recovery, supported by a modest pickup in the US Treasury bond yields helped the pair to regain some fresh traction and bounce off around 50-pips from three-week lows near mid-1.2500s. 

Adding to this, a pull-back in oil prices, with WTI crude oil failing to move past $48.00 handle and retreating to session lows, further weighed on the commodity-linked currency - Loonie, and collaborated to the pair's uptick through the mid-European trading session. 

The up-move, however, lacked any strong follow through momentum as investors now seemed to wait for today's release of Canadian monthly sales report for June for some fresh impetus. 

   •  Canada: Retail sales forecasted to give back 0.4% in June – TDS

Technical levels to watch

On a sustained move beyond the 1.2600 handle, a fresh bout of short-covering could lift the pair towards 1.2640-45 resistance en-route the 1.2700 handle. Meanwhile, on the downside, mid-1.2500s now seems to have emerged as immediate support, which if broken is likely to accelerate the fall towards the key 1.2500 psychological mark. A follow weakness has the potential to drag the pair further towards its next support near the 1.2440-30 region.