USD/CAD drops toward 1.28 as bond yields weigh on greenback

• USD under broad-based selling pressure amid sharp fall in 10-year T-bond yields.
• Barrel of West Texas Intermediate in consolidation below $55.
• US President Trump's Fed chair announcement eyed.

The USD/CAD pair dropped sharply in the last hour and refreshed its lowest level since the beginning of the week at 1.2809. As of writing, the pair was trading at 1.2811, losing 0.43% on the day.

DXY lost traction on disappointing tax bill

Although the most recent GOP tax reform bill showed that it aims to reduce the corporate tax rate from 35% to 20% as expected, it leaves top individual tax rate at 39.6%. Moreover, according to the National Association of Realtors President William Brown, the current form of the bill puts the middle-class homeowners and house values at risk as it nullifies the tax incentives for ownership. Impacted negatively by this development, the 10-year US Treasury-bond yield lost more than 1%, pushing the US Dollar Index to its session low at 94.34. Following the initial reaction, the index recovered some of its losses and was last seen at 94.50, losing 0.16% on the day.

Earlier in the day, the data released by the US Department of Labor showed that weekly initial jobless claims eased to 229K from 234K for the week ending October 28, easing to its lowest level since 1973.

• US: Weekly initial claims was 229,000, a decrease of 5,000 from previous week

On the other hand, after surging above the $55 handle and making a technical correction to close the day with modest losses at $54.30 on Wednesday, the barrel of West Texas Intermediate is moving in a tight range on Thursday, allowing the commodity-sensitive loonie to preserve its strength against the buck. At the moment, the barrel of WTI is flat on the day at $54.30.

Later in the session, New York Fed President William Dudley is going to be delivering a speech, but it's unlikely to trigger sharp fluctuations as investors will be waiting for Trump's announcement of the next Fed chair. 

• US: Powell expected to be nominated to succeed Janet Yellen as Fed Chair - HSBC

Technical levels to consider

According to FXStreet's technical confluence indicator, the pair faces the first technical support at 1.2800 (H4 50-SMA/Fibo 23.6% of 1-month range). A daily close below that level could open the door for further losses toward 1.2700 (psychological level) and 1.2655 (50-DMA). On the upside, resistances align at 1.2870 (daily high), 1.2915 (Oct. 27 high) and 1.3000 (psychological level).