USD/CAD in trouble as bears eyeing a decisive break below 1.36 handle

Having stalled its early European session recovery move to 1.3660 region, the USD/CAD pair refreshed monthly lows after yet another disappointment from the US economic data. 

Spot ran through fresh offers and tumbled to the 1.3600 handle after the US housing market data missed consensus estimates and added to the recent slew of disappointments from the US macro data. In fact, US Building Permits witnessed a sharp slowdown during April, dropping 2.5% m-o-m to 1.229 million annualized pace (vs. 1.27 million estimated and 1.26 million previous). Meanwhile, US Housing Starts also posted similar fall and fell 2.6% m-o-m during the same period to an annualized pace of 1.172 million as against 1.260 million units expected and previous month's 1.203 million units (revised lower from 1.215 million reported earlier). 

The incoming dismal US economic data continued denting market expectations for a faster Fed rate-tightening cycle and weighed heavily on the greenback. In fact, the key US Dollar Index has now tumbled to its lowest level since the US Presidential election and has been one of the key factors driving the pair lower during early NA session. 

Bulls, however, seemed to have been rescued, at least for the time being, by the upbeat release of US industrial production and capacity utilization data, with the pair just managing to hold its neck above the 1.3600 handle.

Meanwhile, against the back drop of readiness shown by major oil producers to extend OPEC-led production cut deal, the prevalent positive sentiment surrounding oil markets, with WTI crude oil holding comfortably above the $49.00/barrel market, further boosted the commodity-linked currency - Loonie, and collaborated to the pair's downslide to fresh three-week lows.

Technical levels to watch

Bears would be aiming for a decisive break through the 1.3600 handle, below which the pair is likely to turn vulnerable to head towards testing the key 1.3500 psychological mark, with some intermediate support near 1.3565-60 area. On the flip side, any recovery attempts might continue to confront fresh supply near mid-1.3600s, which if cleared could trigger a short-covering rally back towards the 1.3700 handle, en-route next major hurdle near mid-1.3700s.