USD/CAD holds steady above 1.3200 mark, lacks follow-through

• Bulls struggled to capitalize on the post-FOMC minutes bounce despite some USD buying.
• A modest pullback in oil prices undermined the loonie and might help limit the downside.

The USD/CAD pair edged higher on Thursday, albeit lacked any strong follow-through and remained confined in a range, just above the 1.3200 round-figure mark.

A combination of factors extended some support, albeit failed to assist the pair to capitalize on the previous day’s strong rebound from the lowest level since late January. The USD/CAD pair on Wednesday witnessed some aggressive short-covering move and rallied around 130 pips from the 1.3200 neighbourhood following the release of the minutes from the FOMC meeting held on July 28-29.

The minutes offered few clues on whether the Fed will adopt a more dovish policy framework in the months ahead. Moreover, a number of Fed members judged that yield caps and targets were not warranted as it would likely provide only modest benefits in the current environment. This, in turn, triggered a brief selloff in the US Treasuries and provided a goodish lift to the US dollar.

Meanwhile, some follow-through USD buying did little to provide any meaningful impetus to the USD/CAD pair. Bullish traders even shrugged off a modest pullback in crude oil prices, which tend to undermine demand for the commodity-linked currency – the loonie. This makes it prudent to wait for some strong follow-through buying before positioning for any further appreciating move.

Market participants now look forward to the US economic docket, which features the release of Philly Fed Manufacturing Index and Initial Weekly Jobless Claims. This, along with the release of Canadian ADP Employment report might produce some short-term trading opportunities later during the early North American session.

Technical levels to watch