- USD/CAD regains positive traction on Thursday and moves little after US and Canadian macro data.
- A modest rebound in crude oil prices underpins the loonie and acts as a headwind for the majors.
- Rising US bond yields offer some dollar support and continue to support the supply tone.
The pair USD/CAD it is down a few points from the daily high and is currently sitting just above 1.3700, still up more than 0.80% on the day.
The US dollar trims a significant portion of its strong intraday gains and proves to be a key factor acting as a headwind for the USD/CAD pair. Aside from this, an intraday bounce in crude oil prices offers some support to the commodity-linked loonie and helps limit the pair’s upside.
That said, a combination of factors underpins the dollar and continues to support the supply tone surrounding the USD/CAD pair. Expectations that the Fed will maintain its aggressive tightening policy trigger a further rise in US Treasury yields. This, coupled with the risk aversion drive, benefits the dollar as a haven.
Market sentiment remains fragile amid concerns about the possible economic fallout from rapidly rising borrowing costs and the risk of a further escalation of the conflict between Russia and Ukraine. Furthermore, concerns that a deeper global economic downturn will dent fuel demand should limit any significant rise in oil prices.
The USD/CAD pair, for its part, reacts little to the mostly upbeat macroeconomic data from the United States and Canada. The final GDP report showed that the world’s largest economy contracted 0.6% at an annualized rate during the second quarter, matching expectations. Additionally, weekly jobless claims fell more than expected last week.
In Canada, monthly GDP beat consensus estimates and posted a modest 0.1% growth in July, although it failed to provide any momentum. That said, the fundamental background suggests that the path of least resistance for the USD/CAD pair is to the upside and any corrective pullback could be viewed as a buying opportunity.
Technical levels to watch
Source: Fx Street
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