USD/CAD sticks to gains above 1.3400 mark amid weaker oil prices

• USD/CAD staged a goodish intraday bounce from seven-week lows.
• Sliding oil prices undermined the loonie and remained supportive.
• The USD struggled to preserve early gains and capped the upside.

The USD/CAD pair maintained its bid tone through the early North American session and refreshed daily tops, around the 1.3430-35 region post-US GDP.

The pair managed to find decent support near the 1.3330 region, or seven-week lows and witnessed some short-covering move on Thursday. A sharp fall in crude oil prices undermined the commodity-linked currency – the loonie – and turned out to be one of the key factors driving the pair higher.

The uptick got an additional boost following the release of the advance US GDP report. The preliminary number showed that the world’s largest economy collapsed by a record 32.9% annualized pace during the second quarter of 2020, less worse than the 34.1% decline anticipated.

However, the US dollar struggled to preserve/capitalize on its intraday recovery move amid a sharp fall in the US Treasury bond yields. This coupled with the impasse over the next round of the US fiscal stimulus further collaborated towards capping, rather prompted some fresh selling.

Even a sharp turnaround in the global risk sentiment – as depicted by renewed weakness in the equity markets – failed to revive the greenback’s safe-haven status. In fact, the key USD Index has now drifted into the negative territory, which might keep a lid on strong gains for the USD/CAD pair.

Hence, it prudent to wait for some strong follow-through buying before confirming that the pair might have bottomed out or positioning for any further near-term appreciating move.

Technical levels to watch