USD/CAD rebounds back to 1.3350 from ten-week lows amid a volatile USD

• US economic data includes more positive than negative surprises.
• Dollar moves up, then down and then rebounds.
• USD/CAD back at the previous range after falling to 1.3300.

The USD/CAD rebounded sharply during the last minutes, trimmed losses and rose back above the key area of 1.3350. The US Dollar is volatile on Thursday following US economic reports and ahead of next week’s FOMC meeting.

Down for the day but…

Economic data from the US came in mostly above expectations. The economy grew at a 2.9% annual rate during the fourth quarter, above the 2.6% of market consensus. Price indicators of the GDP report showed a larger-than-expected slowdown. Initial Jobless Claims dropped to the lowest level since April 2022. The Chicago Fed National Activity Index rose in December to -0.49 from -0.51. Durable Goods Orders rebounded 5.6% in December against market consensus of 2.5%.

The numbers strengthened the US Dollar that hit fresh daily highs across the board. It also helped market sentiment and crude oil prices. The greenback reversed as Wall Street opened higher. During the last hours, the US dollar has recovered most of the lost ground as US yields moved higher and as optimism fades.

A volatile sentiment prevails with keeps the USD/CAD undecided. The pair fell to 1.3301, hitting the lowest since mid-November and then rose back to the 1.3355 zone. If it consolidates well below 1.3350 a new test of 1.3300 seems likely, while if it holds above, the pair could continue to move in the 1.3350/1.3450 range.

On Wednesday, the Bank of Canada raised interest rates by 25 basis points as expected and signalled it will pause the tightening cycle. Next week will be the FOMC meeting. The Fed is seen raising rates by 25 basis points. Attention would be on the clues about the future path.

Technical levels