USD/CAD Analysis: Approaches 1.3600 pivotal resistance ahead of Canadian/US GDP

• USD/CAD gains some positive traction on Thursday, though the upside seems limited.
• The Fed’s projected three rate cuts in 2024 could cap gains for the USD and the major.
• An uptick in Crude Oil prices could underpin the Loonie and contribute to keeping a lid.
• Traders now look to Canadian/US GDP for some impetus ahead of the US PCE on Friday.

The USD/CAD pair attracts some buyers on Thursday and for now, seems to have snapped a three-day losing streak, albeit lacks follow-through and remains below the 1.3600 mark through the early European session. The US Dollar (USD) stands tall near the monthly top touched in reaction to hawkish remarks by Federal Reserve (Fed) Governor Christopher Waller on Wednesday and is seen as a key factor acting as a tailwind for the currency pair. In fact, Waller warned that hotter inflation readings in recent months support the case for the Fed holding off on cutting its short-term interest rate target. This, along with a generally softer tone around the equity markets, is seen lending support to the safe-haven Greenback.

Waller, however, noted that further expected progress on lowering inflation will make it appropriate for the Fed to start cutting rates later this year. Moreover, the Fed last week projected a less restrictive policy going forward and indicated that it remains on track to cut interest rates by 75 bps in 2024. This might hold back the USD bulls from placing aggressive bets and cap gains for the USD/CAD pair amid an uptick in Crude Oil prices, which tends to underpin the commodity-linked Loonie. Traders might also prefer to wait for more cues about the Fed's rate-cut path before positioning for the next leg of a directional move. Hence, the focus remains on the release of the US Personal Consumption Expenditures (PCE) Price Index on Friday.

In the meantime, traders on Thursday will take cues from the monthly Canadian GDP print and the final US Q4 GDP numbers. The US economic docket also features the release of the usual Weekly Initial Jobless Claims, Pending Home Sales and revised Michigan Consumer Sentiment Index later during the early North American session. Apart from this, the US bond yields and the broader market risk sentiment will drive the USD demand. This, along with Oil price dynamics should provide some impetus to the USD/CAD pair and assist traders in grabbing short-term opportunities.

Technical Outlook

From a technical perspective, bulls need to wait for a sustained move and acceptance above the 1.3600 round-figure mark. Given that oscillators on the daily chart have been gaining positive traction, some follow-through buying beyond the 1.3610-1.3615 area should pave the way for a further near-term appreciating move. The USD/CAD pair might then aim to challenge the top end of an upward-sloping channel extending from the first half of January, currently pegged around the 1.3655-1.3660 region. A convincing breakout through the said barrier should lift spot prices to the 1.3700 mark for the first time since November 2023.

On the flip side, the weekly low, around the 1.3550 area, now seems to protect the immediate downside. Any further downfall could be seen as a buying opportunity near the very important 200-day Simple Moving Average (SMA), currently around the 1.3500-1.3490 region. This is closely followed by the 1.3465-1.3460 zone, or the trend-channel support, which if broken will shift the near-term bias in favour of bearish traders. The USD/CAD pair might then turn vulnerable and extend the downward trajectory further towards the 1.3420-1.3415 support en route to the 1.3400 round figure.