USD/CAD retreats farther from 3-week tops, weakens below 1.3100 handle

   •  A modest USD profit-taking prompts some long-unwinding trade on Tuesday.
   •  Bullish oil prices underpin Loonie and further collaborate to the downfall.

The USD/CAD pair extended overnight retracement slide from near three-week tops and weakened farther below the 1.3100 handle through the early European session.

A decent recovery in the Turkish Lira, up by more than 5% for the day, helped ease some concerns about the contagion effect and drove flows away from perceived safe-haven currencies, including the US Dollar. Even a strong follow-through uptick in the US Treasury bond yields failed to revive the greenback demand, with traders opting to light their bullish USD bets amid improving global risk appetite. 

Meanwhile, the ongoing positive momentum around crude oil prices, supported by a report from OPEC, confirming that Saudi Arabia had cut production to avert looming oversupply, underpinned the commodity-linked Loonie and further collaborated to the pair's heavily offered tone on Tuesday.

With today's downfall, the pair has now retreated nearly 100-pips from overnight swing high level of 1.3171 and has also weakened back below 50-day SMA. Hence, a follow-through weakness, led by some fresh long-unwinding amid absent market moving economic releases, now looks a distinct possibility.

Technical levels to watch

Any subsequent weakness is likely to find support near the 1.3055-50 horizontal zone, below which the pair is likely to challenge the key 1.3000 psychological mark before eventually dropping to test 100-day SMA support, currently near the 1.2970 region.

On the flip side, momentum back above the 1.3100 handle is likely to confront immediate resistance at 50-day SMA, near the 1.3125 region, which if cleared could lift the pair back towards 1.3170-80 intermediate hurdle en-route the 1.3200 round figure mark.