USD/CAD bounces off two-month lows, still weaker below 1.33 handle

The USD/CAD pair has managed to recover some of its steep losses to fresh two-month lows and is currently trading around 1.3272-75 region.

With markets still digesting overnight hawkish comments by the Bank of Canada Deputy Governor Carolyn Wilkins, the pair's recovery of around 35-pips from 1.3245 level, the lowest level since April 13, could be attributed to some renewed oil price weakness. 

The latest OPEC monthly bulletin revealed that crude oil production in May rose 336 tbd from April to average 32.14 mbd and attracted some fresh selling interest around oil markets. In fact, WTI crude oil has now dropped back below $46.00/barrel mark and is eventually denting demand for the commodity-linked currency - Loonie.

Weaker oil prices also seems to have tempted bears to take some profits off the table, especially after the pair's sharp drop of nearly 300-pips in just three trading session. 

The pair, however, remains heavily offered amid offered tone surrounding the key US Dollar Index, shrugging off market conviction that the Fed would eventually move towards raising rates on Wednesday.

Next on tap would be the US economic docket, featuring the release of latest PPI print for May and could provide some fresh impetus for short-term traders.

Technical levels to watch

Any further recovery move is likely to confront strong resistance near the 1.3300 handle ahead of 1.3320-25 resistance. A convincing break through the mentioned resistance levels is likely to trigger a short-covering rally back towards reclaiming the 1.3400 handle. 

On the flip side, weakness back below mid-1.3200s is likely to get extended towards 1.3225-20 area (April 13 low), which if broken now seems to pave way for continuation of the pair's downward trajectory towards 1.3185 support en-route 1.3150-45 zone.