USD/CAD marches firmly towards1.2830, after refreshing six-week lows on dismal US GDP

• USD/CAD hit a six-week low at 1.2794 but recovered some ground, eyeing a break above 1.2850.
• The US BEA revealed that the GDP for the second quarter contracted less than the first quarterfinal reading.
• USD/CAD remains positive due to a solid US dollar and falling oil prices.

The USD/CAD bounces from weekly highs and rises towards the 50-day EMA at 1.2853 after dismal US economic data flashes that the US is in a “technical” recession after the Fed hiked 75 bps its interest rate on Wednesday  and conceded that production and spending are “softening.”

The USD/CAD is trading at 1.2833 after refreshing six-week lows at 1.2794 but rebounded and hit a daily high just above the 100-hour EMA at 1.2869 before reaching current exchange rate levels.

USD/CAD advances despite worst than expected US data

Sentiment remains mixed but fragile and could turn sour during the day, meaning upside action for the USD/CAD lies ahead. Shrinking US Q2 GDP data keeps US equities fluctuating from gaining to losing throughout the day. The US Department of Commerce reported that GDP dropped by 0.9% annually after declining 1.6% in the first quarter, meaning that the US is in a technical recession.

In the meantime, the US Department of Labor revealed that unemployment claims for the week ending on July 23 rose by 256K, higher than forecasts but lower than the previous week’s 261K.

Aside from this, the greenback’s rise and falling US crude oil prices keep the USD/CAD risks skewed to the upside. The US Dollar Index, a gauge of the greenback’s value vs. a basket of peers, climbs 0.04% to 106.504, while WTI exchanges hands at $97.99 BPD, down 0.02%.

What to watch on Friday

The Canadian economic docket will feature the GDP for May and June’s GDP preliminary reading. The US calendar will feature the core and headline PCE Price Index for June, alongside the Chicago PMI and the University of Michigan Consumer Sentiment for July, on its final release.

USD/CAD Key Technical Levels