• The dollar trims losses after bouncing up at the 1.3500 support area.
• The upbeat US data have eased negative pressure on the USD.
• USD/CAD is seen appreciating towards 1.40 – MUFG.

The US dollar has been unable to break support at 1.3500 for the second consecutive day and bounced up on Thursday’s afternoon US session to erase previous losses, turning positive on the daily chart.

The greenback ticks up after upbeat US GDP data

US Gross Domestic Product figures have beaten expectations on Thursday, showing a 2.6% annual expansion, after having contracted over the previous two quarters. These figures have eased concerns about a technical recession in the US, giving a fresh boost to the USD.

Previously, the pair had retreated to test one-month lows at 1.3500 against a strong Canadian dollar. The loonie rallied over the previous sessions, buoyed by higher oil prices as the negative impact of Wednesday’s BoC monetary policy decision faded.

Oil prices have appreciated about 0.7% for the second consecutive day on Thursday, with the US benchmark WTI oil reaching levels right below $90. This has spurred demand for the Canadian dollar, as Canada is one of the world’s major oil producers.

USD/CAD is expected to move back towards 1.4000 – MUFG

Currency analysts at MUFG bank remain bullish on the pair and point out to the 1.40 target:  “Yesterday’s decision from the BoC supports our view that yield spreads between the US and Canada will continue to move in favor of USD as the Fed hikes rates for longer and lifts rates higher than the BoC during this hiking cycle (…) We are not convinced yet the US dollar and Fed rate hike expectations have peaked out yet, and still expect USD/CAD to move back towards the 1.4000 level.”

Technical levels to watch