USD/CAD holds steady above mid-1.3100s
- The overnight dovish shift by the BoC provided a strong lift on Wednesday.
- The post-FOMC USD selloff prompted some fresh selling at higher levels.
- Subdued oil prices undermined the Loonie and helped limit the downside.
The USD/CAD pair lacked any firm directional bias and seesawed between tepid gains/minor losses through the early European session on Thursday.
A combination of diverging forces failed to provide any meaningful impetus and led to a subdued/range-bound price action on Thursday, forcing the pair to digest the overnight volatile swing.
Weaker oil prices partly offset USD fall
The pair added to the previous session's modest recovery move from over three-month lows and gained strong follow-through traction on Wednesday in reaction to a dovish shift by the Bank of Canada.
The intraday upsurge of over 125 pips got an additional boost after the Fed sent a clear signal of a possible extended pause to the recent policy easing cycle, through the momentum faltered near 100-day SMA.
The pair retreated around 50 pips from levels just above the 1.3200 handle after the Fed Chair Jerome Powell said that we will need to see a significant move up in inflation before considering raising interest rates.
The not so hawkish remarks triggered a fresh leg of a freefall in the US Treasury bond yields, which kept the USD bulls on the defensive and did little to assist the pair to build on the positive momentum.
However, a weaker tone surrounding Crude Oil prices undermined demand for the commodity-linked currency – Loonie and turned out to be one of the key factors lending some support to the major.
It will now be interesting to see if bulls are able to regain control or the overnight rejection from a key hurdle marks the resumption of the prior/well-established bearish trend ahead of Friday's US monthly jobs report.
Technical levels to watch