USD/CAD hangs near weekly low, moves little post-US/Canadian macro data

• USD/CAD edged lower for the third successive day on Thursday and dropped to a fresh weekly low.
• Rebounding US bond yields, the Fed’s hawkish outlook underpinned the USD and extended support.
• An intraday bounce in oil prices benefitted the loonie and continued capping the upside for the pair.
• The pair had a rather muted reaction to the top-tier US macro data and monthly Canadian GDP print.

The USD/CAD pair remained on the defensive near the 1.2825-30 region, just a few pips above the weekly low touched earlier this Thursday and moved little post-US/Canadian macro data.

The pair extended its retracement slide from the 1.2965 area, or the YTD high touched earlier this week and edged lower for the third successive day, though the slide lacked bearish conviction. Against the backdrop of the Fed's hawkish outlook, a modest pickup in the US Treasury bond yields helped revive the US dollar demand and acted as a tailwind for the USD/CAD pair.

That said, the prevalent risk-on environment kept a lid on any meaningful gains for the safe-haven greenback. Apart from this, an intraday uptick in crude oil prices underpinned the commodity-linked loonie and exerted some pressure on the USD/CAD pair. Traders reacted little to mostly upbeat US economic releases and largely shrugged off the Canadian monthly GDP report.

The US Census Bureau reported that the headline US Durable Goods Orders rose by 2.5% MoM in November, surpassing consensus estimates pointing to a 1.6% rise. Adding to this, the previous month's reading was also revised higher to show a modest 0.1% growth as against the 0.5% fall reported previously. Moreover, Core Durable Goods Orders rose 0.8% MoM as against the 0.6% rise anticipated.

Separately, data published by the US Department of Labor (DOL) revealed that Weekly Initial Jobless Claims held steady at 205,000 during the week ending December 18, matching expectations. Meanwhile, the US Personal Income rose by 0.4% MoM and the US Personal Spending recorded a growth of 0.6% in November, both marking a slight moderation from the previous months' readings.

From Canada, the monthly GDP print matched market expectations and showed a strong 0.8% MoM growth in November. The data, however, did little to provide any meaningful impetus to the USD/CAD pair as investors now seemed reluctant amid thin liquidity ahead into the year-end holiday. This, in turn, warrants some caution before placing aggressive directional bets.

Technical levels to watch