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  • USD/CAD remains on the front foot after the biggest daily gains in three months.
  • US dollar benefits from risk aversion as Fed, ECB flashed dovish signals.
  • WTI weakness exerts an additional burden on the quote.
  • US Q4 GDP will be the key, Canadian Building Permits may gain a little attention.

USD/CAD takes the bids near 1.2820, up 0.14% intraday, during Thursday’s Asian session. In doing so, the quote keeps the previous day’s upside momentum that marked the heaviest jump in three months amid the broad US dollar strength and weakness in Canada’s main export item crude oil.

On Wednesday, the US dollar index (DXY) rose the most in two weeks, currently around 90.60, after risk aversion wave drove traders towards the greenback. Among the main catalysts, the ECB policymakers’ hint for further negative rates and the Fed’s dovish halt was the main to propel the USD. Dutch Governor Klass Knot rekindled the rate cut chatters while the US central bank conveyed moderate economic activity and employment when announcing no rate change. It should be noted that Fed Chair Jerome Powell tried to placate the pessimism with the hopes of economic recovery, backed by vaccination, but failed to hide fears over economic uncertainty.

Read: Powell speech: Jury is out on whether there will be economic scarring

Other than the central bankers, US stimulus gridlock and the EU-UK tussle over the lack of vaccine in the block also heavy the risks amid a light calendar in Asia.

Against this backdrop, S&P 500 Futures drop 0.80% after Wall Street benchmarks flashed over 2.0% losses each during the previous day.

It’s worth mentioning that the souring mood favored the US dollar and weighed on the commodities, taking the WTI crude oil down and exerting extra downside pressure on the Canadian Dollar. The energy benchmark ignored downbeat official inventories while following the risk catalysts. US EIA weekly inventory numbers showed stocks dropping 9.91 million barrels versus expectations for a small 0.430 million barrel build.

Moving on, preliminary reading of the fourth quarter (Q4) US GDP, expected 3.9% QoQ versus 33.4% prior, will be the key as traders will wait to confirm Fed’s dovish outlook. Also likely to propel the USD/CAD are the downbeat expectations from Canadian Building Permits for December, forecast -5.0% against +12.9% prior.

Technical analysis

USD/CAD bulls battle 50-day EMA while cheering an upside break of an 11-week-old falling resistance line. The monthly top near 1.2835 guards the pair’s immediate upside ahead of directing the quote towards the late December high near 1.2960.