USD/CAD pierces 1.3400 amid US dollar pullback, Canadian/US GDP eyed

USD/CAD again heads toward the 1.3418 resistance, currently around the intraday high of 1.3415, before the European traders ring Wednesday’s bell. In doing so, the loonie major benefits from the US dollar’s recovery moves and downbeat oil prices. Also propelling the quote could be the five-month high of the coronavirus (COVID-19) new cases.

The US dollar index (DXY) takes a U-turn from the lowest since September 22 to currently around 93.94, up 0.09% intraday, following the market’s fear of delay in the US election results. The greenback gauge initially dropped as US President Donald Trump failed to combat his Democratic rival Joe Biden in the presidential debate.

The USD might also be cheering the uncertainty over the much-awaited American stimulus package as the White House counter-offered the opposition’s proposal of $2.0 trillion with $1.5-$1.6 trillion. Further, the World Trade Organization’s (WTO) support to the European Union (EU), in announcing $40 billion tariffs on the US goods, adds extra strength to the US currency. It’s worth mentioning that the escalation in the American stopgap funding in the Senate failed to get any major attention as the final voting will be held tomorrow.

In addition to the greenback moves, Canada’s worsening conditions, in terms of the virus, also weigh on the Canadian Dollar (CAD). With Tuesday’s new cases of 1,657, the total active count of COVID-19 reached the highest since April. The same push Ontario, the nation’s most populous province, to restrict visitors’ entry in long-term care homes.

Furthermore, weakness in Canada’s main export item, namely crude oil, also weighs on the CAD and pleases the pair buyers. WTI prints 0.30% losses to $39.09 as we write. The energy benchmark recently ignored China’s upbeat prints of September month Manufacturing PMIs as well as weaker than prior inventory data from the American Petroleum Institute (API).

Looking forward, traders will follow GDP data from the US and Canada for fresh impetus. While July month’s Canadian GDP is likely to drop from 6.5% to 3.0%, the final reading of the US Q2 GDP can confirm the initial forecast of -31.7%.

Technical analysis

A sustained break above 1.3418 will escalate the USD/CAD upside towards July-end tops near 1.3460. On the downside, 50-day EMA near 1.3300 can limit the pair’s short-term declines.