USD/CAD bulls attack 1.3400 on softer Oil price, mixed clues from BoC, US Q4 GDP eyed

USD/CAD picks up bids to add to the first weekly gain in six as bulls poke 1.3400 during the early hours of Thursday’s Asian session. In doing so, the Loonie pair consolidates the post-Bank of Canada (BoC) moves amid softer Oil price and a lack of clarity on the BoC’s next moves. Adding strength to the rebound could be the cautious mood ahead of the first readings of the US fourth quarter (Q4) Gross Domestic Product (GDP).

"Prepared to increase policy rate further if needed to return inflation to 2% target; continuing the quantitative tightening program," mentioned the BoC statement after matching 0.25% rate hike expectations. However, the Canadian central bank also said it would likely hold rates at this level while assessing the impact of recent policy moves. Following that, BoC Governor Tiff Macklem shrugged off rate cut talks. Hence, mixed signals from the BoC allowed USD/CAD buyers to sneak in even if the central bank becomes the first among the majors to talk about the pause in rate lifts.

On the other hand, WTI crude oil struggles to defend $80.00 amid fears of sustained supply cuts from the global oil producers and the US readiness for more Strategic Petroleum Reserve (SPR) release if needed. On the same line could be the fading of China-linked optimism amid the Lunar New Year (LNY) holidays and a cautious mood ahead of the critical data/events. Alternatively, a smaller inventory rise in the US, per the US Energy Information Administration’s (EIA) Crude Oil Stocks Change data for the week ended on January 20, 0.533M versus 0.971M expected and 8.408M prior, as well as the softer US Dollar failed to inspire the energy bulls.

It should be noted that the market sentiment remained dicey amid a light calendar elsewhere and the lack of significant macro, amid the China holidays and the Fed blackout. Wall Street closed mixed, and the US 10-year Treasury bond yields ended Wednesday with minor moves around 3.45%. However, the US Dollar Index (DXY) remained on the back foot for the third consecutive week.

Having witnessed the BoC-led moves, the USD/CAD traders will likely see a volatile day as a slew of US data is up for release. Among them, the first reading of the US Q4 GDP will be crucial amid the recession talks and due to the next week’s Federal Open Market Committee (FOMC) meeting.

Also read: US Gross Domestic Product Preview: Three reasons to expect a US Dollar-boosting outcome

Technical analysis

USD/CAD appears clubbed between 10-week-old support and a downward-sloping resistance line from January 06, respectively, near 1.3345 and 1.3440.