By Ketki Saxena
Investing.com – The Canadian dollar traded flat against its US counterpart today, as US economic data came in strong, raising bets for the Federal Reserve to stay hawkish, while the Canadian dollar was buoyed by an uptick in equities and higher oil prices.
The US economic docket today include GDP, which showed a 2.7% expansion in the economy in the second half of 2022, after a 1.1% decline in the first half of the year.
Jobless claims also fell for the week ending on February 18 came at 192K, below last week’s 194K and lower than the 200K expected.
The Canadian dollar, which remains closely linked to equities, was buoyed by an uptick in sentiment that helped Wall Street indices close in the green after intraday volatility which analysts note was driven by short-dated options trading by institutional investors.
Risk aversion however remains on the rise, with analysts at Scotiabank (TSX:BNS) noting, “In the absence of any major domestic news, the CAD’s still firm correlation with equity market volatility means that the risk backdrop (along with the broader USD trend which will also tend to reflect the overall risk mood) will remain the main drivers.”
The Canadian index also gained some support from crude prices, as Russia announced a plan to cut oil exports from its western ports by up to 25% in March, a figure that would exceed its previously announced production cuts of 500,000 barrels per day
The loonie however remained near its seven week low after being pressured this week by a slide in oil prices, deteriorating risk sentiment, and cooling Canadian inflation that provides a point in the favour of the Bank of Canada’s conditional pause to become permanent.
On a technical level, analysts at FX Street note, “The USD/CAD pair is testing a four-month-old resistance trendline, drawn from November highs of 1.3808, which passes at around the 1.3560/80 area. Also, the Relative Strength Index (RSI) is still bullish and aiming north, putting at risk the previously-mentioned trendline. Once cleared, the USD/CAD could test 1.3600, followed by the next resistance at 1.3664, the January 6 high.”