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  • WTI extends losses, dips below $63 before recovering modestly.
  • US Dollar Index edges down to 98 area following the GDP data.
  • USD/CAD remains on track to post weekly gains.

After testing the 1.35 handle in the early NA session, the USD/CAD pair turned south amid the selling pressure surrounding the greenback and dropped to mid-1.34s. With the trading action turning subdued as we approach the weekend, the pair is moving sideways near 1.3460, losing 0.2% on a daily basis. Despite today’s drop, the pair remains on track to close in the positive territory in the weekly chart for the second straight week.

Following the initial upsurge to a fresh 2019 high of 98.33 on the back of the upbeat first-quarter GDP growth figure, the US Dollar Index quickly reversed its course as investors shifted their focus to the underlying details of the report. Although the U.S. Bureau of Economic Analysis reported that the economy expanded by  3.2% in Q1, the large contribution of temporary factors such as government spending and inventories caused investors to question the sustainability of this growth momentum. The DXY erased its daily gains and was last down 0.15% on the day at 98.  

Commenting on the data,  “The composition of growth isn’t particularly solid.   More than half of the headline 3.2% GDP gain came from a lumpy surge in net exports and a build in inventories – neither of which is likely to be repeated any time soon.   But a 1.2% increase in consumer spending also looks understated given rising wages and still-strong employment growth trends,” said  Nathan Janzen, senior economist at the Royal Bank of Canada.

On the other hand, crude oil prices came under strong selling pressure on Friday with the barrel of West Texas Intermediate slumping to its lowest level in three weeks at $62.26 and made it difficult for the commodity-sensitive loonie to overpower the greenback, limiting the pair’s losses.  

Technical levels to consider