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USD/CAD corrects from 1-week tops, slips below 1.3400 handle

   •  The ongoing USD retracement from 1-1/2 year tops exerts some pressure.
   •  Bearish oil prices undermine Loonie and might help limit further downside.

The USD/CAD pair held on to its mildly weaker tone through the early European session, with bears eyeing a follow-through weakness below the 1.3400 handle.

The pair struggled to build on the overnight up-move and started retreating from one-week tops amid some renewed US Dollar selling bias. After a brief pause during the Asian session, the greenback resumed with its recent corrective slide from 1-1/2 year tops and continues to be weighed down by uncertainty over Fed's rate hike path in 2019.

Growing speculations the Fed is likely to pause its rate hike cycle in 2019, especially after the recent dovish comments by various Fed officials, including the Fed Chair Jerome Powell, turned out to be one of the key factors exerting some downward pressure on the greenback.

The downside, however, remained cushioned, at least for the time being, amid the prevailing bearish sentiment surrounding oil markets, which dampened demand for the commodity-linked currency - Loonie. In fact, WTI crude oil prices fell over 1.5% on Tuesday on reports of growing inventory and concerns over future demand.

It would now be interesting to see if the pair is able to find any buying interest at lower levels or continues with its corrective slide as the market focus remains glued to the upcoming FOMC monetary policy decision, scheduled to be announced during the US trading session on Wednesday.

In the meantime, today's US economic docket, featuring the second-tier releases of housing market data, will be looked upon for some short-term trading impetus later during the early North-American session.

Technical levels to watch

Immediate support is pegged near the 1.3380 horizontal level, below which the pair is likely to accelerate the slide towards mid-1.3300s before eventually dropping further towards the 1.3320-10 support area. On the flip side, the 1.3420 region now seems to have emerged as an immediate hurdle and is followed by multi-month tops, around the 1.3445 level, which if cleared might assist the pair to aim towards reclaiming the key 1.3500 psychological mark.

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