USD/CAD clings to gains above 1.3700 mark post-US data/Canadian GDP

• USD/CAD regains positive traction on Thursday and moves little post-US/Canadian macro data.
• A modest bounce in crude oil prices underpins the loonie and acts as a headwind for the major.
• Rising US bond yields offer some support to the USD and remain supportive of the bid tone.

The USD/CAD pair retreats a few pips from the daily high and is currently placed just above the 1.3700 mark, still up over 0.80% for the day.

The US dollar surrenders a major part of its strong intraday gains and turns out to be a key factor acting as a headwind for the USD/CAD pair. Apart from this, an intraday bounce in crude oil prices offers some support to the commodity-linked loonie and further contributes to capping the upside for spot prices.

That said, a combination of factors underpins the greenback and remains supportive of the bid tone surrounding the USD/CAD pair. Expectations that the Fed will stick to its aggressive policy tightening path triggers a fresh leg up in the US Treasury bond yields. This, along with the risk-off impulse, benefits the safe-haven buck.

The market sentiment remains fragile amid worries about the potential economic fallout from the rapidly rising borrowing costs and the risk of a further escalation in the Russia-Ukraine conflict. Moreover, concerns that a deeper global economic downturn will dent fuel demand should cap any meaningful upside for oil prices.

The USD/CAD pair, meanwhile, reacts little to mostly upbeat macro data from the US and Canada. The final GDP report showed that the world's largest economy contracted by 0.6% annualized pace during the second quarter, matching expectations. Furthermore, the US Weekly Initial Jobless Claims fell more than anticipated last week.

From Canada, the monthly GDP print surpasses consensus estimates and records a modest 0.1% growth in July, though fails to provide any impetus. That said, the fundamental backdrop suggests that the path of least resistance for the USD/CAD pair is to the upside and any corrective pullback could be seen as a buying opportunity.

Technical levels to watch