USD/CAD keeps post-Fed losses at 1.5-month low near 1.2800, US GDP eyed

• USD/CAD remains pressured around six-week low, keeps Fed-inspired bearish bias despite oil’s pullback.
• Fears of US recession also recently poked bears even as Fed’s Powell favored sellers.
• FOMC matched market’s forecast of 0.75% rate hike, Fed Chair Powell signaled lesser aggression.
• Advance readings of US Q2 GDP will be important, risk catalysts should be watched too.

USD/CAD bears approach 1.2800 while extending the post-Fed losses during Thursday’s Asian session. In doing so, the Loonie pair ignores a pullback in prices of Canada’s key export item, namely WTI crude oil, as well as the easing of the risk-on mood.

That said, the intact fears of the US economic slowdown as portrayed by the US Treasury yield curve, conveyed by Reuters, appeared to have recently probed the optimists and challenged the USD/CAD bears. The analysis mentions that the US government bond market is sending a fresh batch of signals that investors are increasingly convinced the Federal Reserve's aggressive actions to tame inflation will result in recession. “Some of those moves reversed slightly on Wednesday, with rates at the short end of the curve turning lower on expectations of the Fed being less likely to continue with super-sized hikes,” adds Reuters.

The US 10-year Treasury yields dropped nearly four basis points (bps) to 2.78% while the 2-year bond coupons slumped by 2.58% to 2.98% after the Fed’s 0.75% rate hike. Even so, the gap between the key US bond coupons remains the widest since 2000 and in turn hints at the US recession woes.

It’s worth noting that the USD/CAD prices slumped to the lowest levels since June 13 after the US Federal Reserve (Fed) matched market forecasts by announcing a 75-bps rate increase. The underlying reason for the pair’s weakness could be attributed to Fed Chairman Jerome Powell’s speech as it signaled that the hawks are running out of fuel. Key comments from the Fed’s Powell were that the rates had reached neutrality, so there won't be any more forward guidance, as well as rates will be decided meeting by meeting.

Elsewhere, US Durable Goods Orders rose by 1.9% MoM versus expectations of -0.4% and the revised prior of 0.8%. Further, the Nondefense Capital Goods Orders excluding Aircraft also increased by 0.5% compared to 0.2% market consensus and 0.6% prior. Additionally, the US Pending Home Sales dropped by 8.6% MoM in June, compared to the market expectation for a decrease of 2% and following May's growth of 0.4%.

It should be observed that the WTI crude oil prices pare the biggest daily jump in over a week around 97.25 while the S&P 500 Futures drop 0.10% intraday at the latest.

Moving on, USD/CAD traders should pay attention to the risk catalysts for fresh impulse ahead of the first readings of the US Q2 Gross Domestic Product (GDP) Annualized, expected 0.4% versus -1.6% prior.

Also read: US GDP Preview: Win-win for the dollar? Economy's flirt with recession to boost the buck

Technical analysis

The first daily closing below the 50-DMA since early June keeps USD/CAD sellers hopeful of keeping the reins until the quote rises back beyond the stated moving average surrounding 1.2855.