USD/CAD holds weaker below 1.22 handle

The USD/CAD pair traded with mild negative bias through early European session and eroded part of previous session's modest up-move. 

The pair continued with its struggle to sustain above the 1.2200 handle and lacked any firm near-term directional bias. A combination of diverging factors has failed to assist the pair to register any meaningful recovery from 28-month lows touched earlier this month.

Of late, the US Dollar has been showing some signs of bottoming out amid reviving hopes for additional Fed rate hike action by the end of this year. However, a strong and steady rise in crude oil prices underpinned the commodity-linked currency - Loonie and has kept a lid on any immediate sharp up-move for the major.

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Today's economic docket features the release of Canadian foreign securities purchases and US NAHB Housing Market Index. The key focus, however, would remain on this week's very important FOMC decision, due to be announced on Wednesday, which should provide some fresh impetus for the pair's near-term trajectory.

Technical levels to watch

A follow through weakness below 1.2160 level could drag the pair back towards 1.2130-25 support area ahead of the 1.2100 handle. On the upside, sustained move beyond the 1.2200 handle, leading to a subsequent move above 1.2220-30 area, might trigger a short-covering bounce towards the 1.2300 mark en-route 1.2330-35 hurdle.