USD/CAD sees a decisive move below 1.2800, US PCE and Canada GDP eyed

• USD/CAD is likely to surrender the cushion of 1.2800 as the DXY has extended its losses.
• Lower GDP and a higher inflation rate will create more troubles for the Fed.
• The Canadian economy is expected o contract by 0.2% against the expansion of 0.3%.

The USD/CAD pair is hovering around the psychological support of 1.2800 and is gearing up for a downside move as the US dollar index (DXY) has extended its losses after violating the five-day-old support at 106.00. The asset has remained sideways in the Asian session and is likely to turn imbalance on the downside as lower US Gross Domestic Product (GDP) data has triggered recession fears in the mighty US economy.

On Thursday, the US Bureau of Economic Analysis reported the annual Gross Domestic Product (GDP) at -0.9%, improved from the prior contraction of -1.6% but lower than the expectations of 0.5%. A consecutive contraction in the US economy has resulted in a steep fall in the DXY. The asset has printed a fresh three-week low of 105.85.

Investors should be aware of the fact that the Federal Reserve (Fed) has been announcing policy tightening measures unhesitatingly as solid fundamentals in the US economy were supporting Fed policymakers to sound hawkish with confidence. In today’s session, investors will focus on the release of the US Personal Consumption Expenditure (PCE), which is seen high at 6.7%. Price pressures have yet not displayed exhaustion signals and the lower GDP numbers are not going to delight Fed chair Jerome Powell.

On the loonie front, the Canadian economy will report the GDP numbers. As per the market estimates, the Canadian economy will contract by 0.2% against the expansion of 0.3% recorded earlier. An occurrence of the same will weaken the loonie bulls.