USD/CAD remains confined in a range above 1.2900 mark, moves little post-US GDP

• A combination of diverging forces failed to provide any meaningful impetus to USD/CAD.
• The risk-on mood, retreating US bond yields weighed on the USD and capped the upside.
• A softer tone around crude oil prices undermined the loonie and extended some support.

The USD/CAD pair extended its sideways consolidative price move through the early North American session and held steady above the 1.2900 mark post-US GDP.

A combination of factors kept the US dollar bulls on the defensive for the third successive day on Wednesday and acted as a headwind for the USD/CAD pair. The downside, however, remained cushioned amid a modest downtick in crude oil prices, which tend to undermine the commodity-linked loonie.

The optimism led by reports that the Omicron is less severe and that the current vaccines may be more effective than first thought in fighting the new strain weighed on the safe-haven greenback. This, along with a fresh leg down in the US Treasury bond yields, kept the USD bulls on the defensive.

On the economic data front, the final US GDP report showed that the world's largest economy expanded by 2.3% annualized pace during the third quarter as against 2.1% estimated previously. This, however, did little to lend any support to the greenback or provide any impetus to the USD/CAD pair.

Meanwhile, crude oil prices struggled to capitalize on this week's solid rebound from the $68.00 level and witnessed some intraday selling. This, in turn, weighed on the Canadian dollar and helped limit any deeper losses for the USD/CAD pair amid relatively thin liquidity conditions in the markets.

Apart from this, the Fed's hawkish outlook, indicating at least three rate hikes next year, should act as a tailwind for the greenback. This makes it prudent to wait for some follow-through selling before confirming that the USD/CAD pair has topped out and positioning for a deeper pullback.

Technical levels to watch