USD/CAD extends Friday’s rejection slide from 200-DMA

   •  USD retreats further on weaker US bond yields.
   •  Loonie further supported by bullish oil prices.
   •  Downside remains limited ahead of the key event risk.

The USD/CAD pair met with some fresh supply near the 1.2660 area and resumed with rejection slide from the very important 200-day SMA barrier. 

Against the backdrop of Friday's hotter-than-expected Canadian inflation figures, showing consumer prices rising above consensus at an annualized pace of 1.7% in December, a fresh wave of US Dollar selling pressure was seen as one of the key factors weighing on the major.

This coupled with a mildly positive tone around crude oil prices provided an additional boost to the commodity-linked currency - Loonie and further collaborated to the pair's retracement from session tops. 

Further downside, however, remained limited as remained cautious ahead of the Fed Chair Jerome Powell's first congressional testimony on Tuesday. Ahead of the next big event risk, the release of new home sales data might provide some short-term trading impetus later during the early NA session. 

From a technical perspective, any weakness below 100-day SMA is finding some buying interest ahead of the 1.2600 handle. Hence, it would be prudent to wait for a follow-through selling pressure before confirming that pair might have topped out in the near-term.

Technical levels to watch

A convincing break below the mentioned support is likely to accelerate the fall towards 50-day SMA support near the 1.2540-35 region en-route the key 1.2500 psychological mark. 

On the upside, the 1.2660-70 region, followed by the 1.2700 handle (200-DMA),  might continue to attract some fresh selling, above which the pair seems all set to extend its bullish trajectory in the near-term.