USD/CAD drops to the fresh low since February 2018 amid US dollar weakness, WTI strength
- USD/CAD remains pressured around the multi-day low after flashing the heaviest losses in a week.
- US dollar extends south-run to two-month bottom as Fed refrains from talking tapering.
- WTI tracks S&P 500 Futures amid hopes of further stimulus, vaccine-led recovery.
- US GDP becomes the key data, risk catalysts hold the driver’s seat.
USD/CAD takes offers around the lowest since February 2018, down 0.11% near 1.2300, during early Thursday. In doing so, the Loonie pair cheers the US dollar weakness and mild gains of the WTI oil, Canada’s main export item, amid a quiet day.
The US dollar index (DXY) refreshes a two-month low as Asian traders react to the US Federal Reserve’s (Fed) cautious optimism. The Fed kept benchmark rates and bond-buying unchanged but Chairman Jerome Powel sounds a bit cautious about the economic recovery and recently strong data.
Following the Fed, markets shrugged off reflation fears as the policymakers rejected talking about tapering.
Also, the sustained stimulus and recently upbeat economic momentum due to the jump in the vaccinations in the West offer a helping hand to the WTI prices that earlier cheered softer-than-expected inventory increase.
Amid these plays, US 10-year Treasury yields stay depressed while S&P 500 Futures print 0.42% gains by the press time.
Looking forward, USD/CAD traders should pay close attention to the preliminary readings of US Q1 GDP, expected 6.5% versus 4.3% prior, for fresh direction. However, the risk catalyst shouldn’t be ignored.
Read: US Q1 GDP Preview: Eyes on inflation and FOMC as economic recovery gathers steam
Technical analysis
Unless trading successfully above the previous multi-day low of 1.2365, flashed in March, even the short-term USD/CAD buyers aren’t likely to take the risk of entries.