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USD/CAD flirting with daily lows, just above mid-1.3200s ahead of Canadian CPI

   •  The USD remains on the defensive amid renewed US-China trade optimism.
   •  A goodish pickup in oil prices underpin Loonie and add to the selling bias.
   •  Today’s key focus will be on the latest Canadian consumer inflation figures.

The USD/CAD pair extended the overnight late pull-back from over one-week tops and traded with a negative bias through the mid-European session.

Having spiked to an intraday high level of 1.3319 on Thursday, the pair started losing steam following the WSJ report that the US Treasury Secretary Steven Mnuchin is in favour of easing tariffs on Chinese imports. 

As investors wait for more progress on the US-China trade talks, the US Dollar held on the defensive on the last trading day of the week and was seen as one of the key factors exerting some downward pressure.

A possible relaxation of the US tariffs on China also improved the outlook for global oil demand and was evident from a goodish up-move in crude oil prices on Friday, which further underpinned the commodity-linked Loonie. 

Adding to this, Thursday's OPEC monthly report, showing that the cartel's production fell sharply in December, remained supportive of the positive sentiment around oil markets.

Despite a combination of negative forces, bearish traders still seemed reluctant to place aggressive bets and preferred to wait on the sidelines ahead of today's important release of Canadian consumer inflation figures. 

Technical levels to watch

A follow-through selling might now turn the pair vulnerable to challenge 100-day SMA support, around the 1.3185-80 region. On the upside, the 1.3300 handle now seems to act as an immediate hurdle, which if cleared might trigger a short-covering bounce towards 50-day SMA, around the 1.3340 region.

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