USD/CAD extends overnight retracement, ignores weaker oil prices

   •  Fresh concerns over US tax reforms prompting some long-unwinding.
   •  Weaker oil prices might help limit sharp downslide. 
   •  Canadian housing data/US oil inventory data to provide fresh impetus.

The USD/CAD pair extended overnight retracement and traded with a mild negative bias through the early European session on Wednesday.

Overnight sharp retracement in crude oil prices helped the pair to stage a strong recovery from the 1.2700 handle and move back above the 1.2800 handle. 

However, fresh concerns over the US tax reforms plan, on reports that a key corporate tax cut could be delayed for one year, interrupted strong US Dollar rally and prompted some long-unwinding trade since the NY trading session on Tuesday. 

Meanwhile, a follow-through weakness around oil markets, led by today's weaker than expected Chinese trade balance data, failed to provide any additional boost to the commodity-linked currency - Loonie. This coupled with a modest pickup in the US Treasury bond yields might now collaborate towards limiting deeper losses, at least for the time being.

In the absence of any market moving economic releases from the US, Canadian housing market data would now be looked upon for some trading impetus ahead of the key EIA weekly US crude oil inventories data.

Technical levels to watch

A follow-through retracement below mid-1.2700s could drag the pair back towards the 1.2700 support, which if broken could extend the corrective slide towards 100-day SMA support, currently near the 1.2605-1.2600 region.

On the upside, the 1.2800 handle remains immediate strong hurdle, which if conquered might trigger a short-covering rally back towards the 1.2890-1.2900 region.