USD/CAD rebounds from two-week lows, retakes 1.2600 mark post-Canadian GDP
|- A combination of factors assisted USD/CAD to reverse an intraday dip to the 1.2570 region.
- Sliding oil prices, dismal Canadian GDP print undermined the loonie and remained support.
- Sustained USD selling bias warrants some caution before positioning for any further gains.
The USD/CAD pair recovered around 35-40 pips from two-week lows and climbed back above to the 1.2600 mark during the early North American session.
The pair remained on the defensive for the third consecutive session on Tuesday and was pressured by the prevalent selling bias surrounding the US dollar. Uncertainty over the likely timing of the Fed's taper plan, along with fading hopes for an early lift-off kept the USD bulls on the defensive.
Even rebounding US Treasury bond yields and a turnaround in the equity markets failed to provide any respite to the safe-haven greenback. That said, retreating crude oil prices – now down over 1% for the day – undermined the commodity-linked loonie and helped limit losses for the USD/CAD pair.
Apart from this, the Canadian dollar was further weighed down by disappointing GDP report. Data published by Statistics Canada revealed that the economy contracted by 1.1% during the second quarter of 2021 as against market expectations for a 2.5% growth and 5.5% rise in the previous quarter.
Despite the intraday bounce, the USD/CAD pair lacked bullish conviction. This, in turn, makes it prudent to wait for some strong follow-through buying before confirming that the recent pullback from YTD lows has run its course and positioning for any meaningful gains for the USD/CAD pair.
Technical levels to watch
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