USD/CAD struggles near multi-week low amid weaker USD, uptick in oil prices

• USD/CAD stages a modest bounce from a six-week low touched earlier this Thursday.
• The post-FOMC USD selling, bullish crude oil prices could cap any attempted recovery.
• Investors look forward to the Advance US Q2 GDP report for some meaningful impetus.

The USD/CAD pair reverses an early European session dip to sub-1.2800 levels, or its lowest level since June 13 and for now, has managed to defend the 100-day SMA support. The pair is now seen trading in the neutral territory, around the 1.2815 region, though any meaningful recovery seems elusive.

Fed Chair Jerome Powell's less hawkish remarks on Wednesday drags the US dollar to its lowest level since July 6, which could act as a headwind for the USD/CAD pair. In the post-meeting press conference, Powell signalled that another large adjustment could be coming at the next policy meeting in September, but it would be dependent on the incoming data.

Furthermore, the Fed officials also acknowledged that economic indicators have softened and noted signs of a slowdown. This suggests that the US central bank would slow the pace of its interest rate hikes, which remains supportive of a generally positive tone around the equity markets. The risk-on impulse is seen as another factor weighed on the safe-haven USD.

Crude oil prices, meanwhile, climbed to a one-week high and drew support from the bullish supply data from the US Energy Information Administration on Wednesday. This, along with the prospects for another supersized 100 rate hike move by the Bank of Canada, should underpin the commodity-linked and also contribute to capping gains for the USD/CAD pair.

The fundamental backdrop seems tilted in favour of bearish traders and supports prospects for an extension of the recent pullback from the YTD low, around the 1.3225 area touched earlier this month. Market participants now look forward to the release of the Advance US Q2 GDP report, which would influence the USD and provide a fresh impetus to the USD/CAD pair.

Technical levels to watch