USD/CAD keeps the red near 2-1/2 week lows, below 1.2800 handle

   •  USD profit taking slide accelerates post-softer US CPI figures.
   •  Bullish oil prices underpin Loonie and add to the pressure.

The USD/CAD pair remained under some intense selling pressure for the second consecutive day on Thursday and dropped to 2-1/2 week lows in the past hour.

The pair extended its rejection slide from the key 1.30 psychological mark, touched on Wednesday, and was further weighed down by a follow-through US Dollar profit-taking slide. 

Today's softer US inflation figures suggest that the Fed can wait after an imminent rate hike in June, evident from a sharp retracement in the US Treasury bond yields, and exerted some additional downward pressure on the greenback.

This coupled with a strong bullish sentiment around oil markets continued underpinning demand for the commodity-linked currency - Loonie and further collaborated to the pair's fall below mid-1.2700s. 

Against the backdrop of the recent US withdrawal from the Iran nuclear deal, rising geopolitical tension in the middle-east provided an additional boost and lifted WTI crude oil prices to fresh 3 1/2-year highs on Thursday.

Today's steep decline could also be attributed to some fresh technical selling following a decisive break below 50-day SMA support, which had been acting an important support over the past two weeks. 

Meanwhile, the selling now seems to have abated a bit, at least for the time being, with the pair quickly recovering around 30-pips from lows to currently trade around the 1.2770-75 region.

Technical levels to watch

Any subsequent recovery is likely to confront fresh supply near the 1.2800 handle and is followed by resistance near the 1.2835-40 region (50-DMA). On the flip side, sustained weakness below mid-1.2700s might turn the pair vulnerable to break 1.2700 handle and test 100-day SMA support near the 1.2685 region.