USD/CAD approaches 1.2300 lows as the loonie builds up

• US dollar's recovery fails at 1.2380.
• Weak US GDP data has hurt the greenback.
• USD/CAD is expected to continue sliding towards 1.2208 –  Credit Suisse.

The US dollar’s recovery attempt from Wednesday’s low at 1.2300 has been frustrated at 1.2380 and the pair turned lower against, retreating to 1.2330 against a somewhat firmer Canadian dollar.

The dollar dives after downbeat US GDP data

The greenback has accelerated its decline, following the release of disappointing Gross Domestic Product figures in the US. According to an estimate from the Commerce Department, the US economy slowed down to a 2% annual growth in the third quarter, from 6% in the second, hampered by supply chain disruptions and a slight increase of COVID-19 cases

These advanced figures have fallen short of the 2.7% growth forecasted by market analysts and actually represent the weakest performance since the second quarter of 2020 when the economic activity was hit by restrictions under the first COVID-19 wave.

On the other hand, the Canadian dollar has been showing muscle over the last sessions, buoyed by the hawkish monetary statement by the Bank of Canada. The BoC confirmed on Wednesday the end of their bond-buying program and hinted at an interest rate hike in the first half of next year, which pushed Canadian bond yields higher, ultimately increasing demand for the CAD.

USD/CAD to continue depreciating towards 1.2208 – Credit Suisse

From a wider perspective, FX Analysts at Credit Suisse contemplate further depreciation ahead: “We look for a break below the recent range low at 1.2287 for a move to 1.2252 next, with further retracement support just below here at 1.2208. This level is likely to prove a tough barrier in our view, however, we note that the next supports are seen at 1.2156/45.”

Technical levels to watch