- USD / CAD regained positive traction on Thursday and was supported by a combination of factors.
- Falling US bond yields undercut the loonie and acted like a tailwind amid resurgent demand for the dollar.
- The USD was supported by the ongoing rally in US bond yields, which helped offset the softer data.
The pair USD / CAD it maintained its offered tone and held comfortably around the 1.2625-30 region during the early North American session, although it lacked any subsequent buying.
A combination of support factors helped the USD / CAD regain positive traction on Thursday and re-approach overnight swing highs. Crude oil prices broke three consecutive days of the winning streak due to concerns that rising COVID-19 infections could affect fuel demand. This, in turn, undermined the commodity-pegged Canadian dollar and acted as a tailwind for the USD / CAD amid a good recovery in US dollar demand.
The USD found some support in the recent strong bullish movement in US Treasury yields In fact, the yield on the benchmark 10-year US government bond returned above 1.35%. amid expectations that the Fed could still begin to reduce its pandemic-era stimulus in 2021. Market expectations were bolstered by comments from St. Louis Fed Chairman James Bullard, saying he would like to Asset downsizing is completed by the first quarter of 2022.
This, to a greater extent, helped offset weaker US macroeconomic data and underlying bullish sentiment in markets, which tends to weigh on the safe-haven dollar. Data released Thursday showed that the US economy expanded at an annualized rate of 6.6% during the second quarter. This was slightly better than the 6.5% initially estimated, although the consensus pointing to a 6.7% reading disappointed. Separately, initial US weekly unemployment increased to 353,000 from 349,000-
Despite the support factor, the USD / CAD pair lacked strong bullish conviction. Investors seemed reluctant to make aggressive bets, preferring to wait on the sidelines before Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium. This makes it prudent to wait for some solid follow-up buying before confirming that the recent sharp pullback from yearly highs around 1.2950 has run its course and positioned itself for further gains.
Technical levels
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