- USD/CAD failed to preserve its modest intraday gains to the 1.2470-75 region.
- Sustained USD selling bias was seen as a key factor that acted as a headwind.
- Mixed US macro data, Canadian GDP failed to provide any meaningful impetus.
The USD/CAD pair held steady near the 1.2430-35 region, or over two-week lows and had a rather muted reaction to the US/Canadian macro data.
The pair struggled to capitalize on its intraday positive move, instead met with some fresh supply near the 1.2470-75 area amid the prevalent US dollar selling bias. Bulls seemed rather unimpressed by a softer tone around crude oil prices, which tend to undermine the commodity-linked loonie.
The USD remained on the defensive near one-month lows amid firming expectations that the Fed would retain its ultra-lose monetary policy stance for a longer period. It is worth recalling that the Fed Chair Jerome Powell emphasised that they were some ways away from substantial progress on jobs.
On the economic data front, the US Core PCE Price Index – the Fed’s preferred inflation gauge – edged higher to 3.5% YoY in June, missing expectations for a reading of 3.7%. This, to a larger extent, offset an unexpected rise in the Personal Income and better-than-expected Spending data.
Meanwhile, the Canadian monthly GDP report showed that the economic activity contracted 0.3% MoM in May. This, along with a modest pullback in crude oil prices, held traders from placing any aggressive bullish bets around the Canadian dollar and helped limit deeper losses for the USD/CAD pair.
Friday’s US economic docket also features the release of Chicago PMI and revised Michigan Consumer Sentiment Index, though is unlikely to provide any meaningful impetus to the USD/CAD pair. That said, the USD/oil price dynamics might still contribute to producing some trading opportunities.
Technical levels to watch