USD/CAD sits near multi-week tops, just above mid-1.3100s

The USD/CAD pair maintained its bid tone through the early European session on Thursday and is currently placed just below four-week tops set earlier, around mid-1.3100s.

The pair edged higher for the third consecutive session on Thursday and added to the previous session's strong intraday positive move of around 120 pips, triggered by dovish sounding monetary policy statement by the Bank of Canada (BoC).

The BoC, at the latest policy meeting on Wednesday, left its key benchmark interest rate unchanged at 1.75% but removed the reference to the current rate as “appropriate” and downgraded the GDP growth projection for 2020 to 1.6% from 1.8%.

The central bank also showed concerns about the recent weak data. This combined with the earlier release of softer Canadian consumer inflation figures for December exerted some heavy downward pressure on the Canadian dollar.

Adding to this, some follow-through weakness in crude oil prices, now down around 1.5% for the day, further undermined demand for the commodity-linked currency – the loonie – and remained supportive of the pair's ongoing positive movement.

Meanwhile, reviving safe-haven demand, amid concerns coronavirus outbreak in China, led to a modest pullback in the US Treasury bond yields, which kept the USD bulls on the defensive and turned out to be the only factor capping further gains.

It will now be interesting to see if the pair is able to capitalize on the momentum or bulls opt to take some profits off the table amid absent relevant market-moving economic releases on Thursday, either from the US or Canada.

Technical levels to watch