USD/CAD bounces off three-year lows, still in the red around 1.2500 mark
|- The heavily offered tone surrounding the USD continued exerting pressure on USD/CAD.
- Surging US bond yields, mostly upbeat US macro data did little to impress the USD bulls.
- A modest pullback in crude oil prices undermined the loonie and extended some support.
The USD/CAD pair remained depressed through the early North American session, albeit managed to rebound around 30 pips from three-year lows touched earlier this Thursday.
The US dollar plunged to its lowest level since early January and was being pressured by Fed Chair Jerome Powell's dovish signal, reassuring that interest rates would stay low for a long time. This comes amid the optimism over a strong global economic recovery, which gave a fresh impetus to reflation trade and further dented the greenback's relative safe-haven status.
The USD seemed unimpressed the continuous surge in the US Treasury bond yields and shrugged off mostly upbeat US macro data. The Prelim US GDP report showed that the economy expanded by 4.1% annualized pace during the October-December period as compared to 4.0% estimated previously. Adding to this, the Initial Jobless Claims and Durable Goods Orders also came in better than expectations.
The negative factor, to some extent, was offset by a modest pullback in crude oil prices, which undermined the commodity-lined loonie and extended some support to the USD/CAD pair, at least for the time being. Apart from this, oversold conditions on short-term charts further prompted some intraday short-covering bounce and lifted the pair back to the key 1.2500 psychological mark.
It, however, remains to be seen if the USD/CAD pair is able to capitalize on the recovery or the attempted recovery is seen as an opportunity to initiate fresh bearish positions. This makes it prudent to wait for some strong follow-through buying before confirming that the pair might have bottomed out in the near-term and positioning for any meaningful appreciating move.
Technical levels to watch
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