USD/CAD consolidates daily recovery gains above 1.3400

• USD/CAD is staging a decisive rebound on Thursday.
• US Dollar Index recovers above 93.50 following Wednesday’s drop.
• Investors are focused on the second-quarter GDP data from the US.

The USD/CAD pair closed in the negative territory on Wednesday as the greenback struggled to find demand following the Fed’s policy statement. However, the USD started to gather strength on Thursday and helped the pair stage a decisive rebound. As of writing, USD/CAD was up 0.54% on a daily basis at 1.3413.

USD gathers strength ahead of GDP report

As expected, the FOMC left its policy rate unchanged and didn’t make any major changes to its forward guidance. During the press conference, FOMC Chairman Jerome Powell voiced their concerns over rising coronavirus cases since June and reiterated that more fiscal support will be needed to support the economy.

Although the US Dollar Index (DXY) slumped to its lowest level in more than two years at 93.18, it reversed its direction on Thursday as the USD seems to be, once again, capitalizing on risk-off flows. At the moment, the DXY is up 0.35% on the day at 93.58.

In the second half of the day, the US Bureau of Economic Analysis will release its first estimate of the second-quarter real Gross Domestic Product (GDP). 

Previewing this critical data, “the widest measure of economic activity is forecast to drop 34.1% in the second quarter with range of consensus estimates in the Reuters survey running from -22.6% to 40.0%,” noted FXStreet analyst Joseph Trevisani. “For the dollar, a historic decline in GDP and further Fed actions are priced. If the GDP figures are better than expected some profit-taking might be in order.”

Technical levels to watch for