USD/CAD clings to modest gains, remains below 1.3700 mark post-Canadian GDP

The USD/CAD pair held on to its modest daily gains, albeit remained below the 1.3700 round-figure mark post-Canadian GDP report.

Following the previous day's intraday pullback of around 60 pips, the pair managed to regain some positive traction on Tuesday and was being supported by a combination of factors. The US dollar was back in demand and drove some haven flows amid worries about the continuous rise in the number of new coronavirus cases globally.

Meanwhile, concerns that second wave of COVID-19 infections might trigger renewed lockdown measures dampened prospects for a swift recovery in fuel demand. This, in turn, led to a modest pullback in oil prices, which undermined demand for the commodity-linked currency – the loonie – and remained supportive of the USD/CAD pair's uptick.

The Canadian dollar remained on the defensive and failed to gain any respite following the release of the better-than-expected domestic GDP report, which showed that the economy contracted by 11.6% in April. The reading was better than consensus estimates pointing to a reading of -13% but marked steeper contraction as compared to -7.5% in March.

Market participants now look forward to the US economic docket, featuring the release of Chicago PMI and the Conference Board's Consumer Confidence Index. Later during the US session, the Fed Chair Jerome Powell's testimony before the House Financial Services Committee might contribute towards producing some meaningful trading opportunities.

Technical levels to watch