- A follow-through pullback in Oil prices undermined Loonie and helped regain traction.
- Investors now look forward to Canadian CPI for some impetus ahead of FOMC decision.
The USD/CAD pair remained well bid through the early European session on Wednesday and is currently placed at daily tops, around the 1.3260-65 region, still below the overnight swing high.
The pair on Tuesday gained strong positive traction and rallied to near two-week tops, around the 1.3300 handle amid a sharp intraday pullback in Crude Oil prices, which tend to undermine demand for the commodity-linked currency – Loonie.
Weaker Oil/stable USD supportive
In fact, Oil prices tumbled around 6% on Tuesday after Saudi Arabia’s energy minister said the kingdom has tapped inventories to restore supplies to where they stood before drone attacks over the weekend, which shut around 5% of global oil output.
The uptick, however, fizzled out rather and failed ahead of the very important 200-day SMA, with the pair finally ending the day nearly unchanged – just a few pips below mid-1.3200s – amid some renewed selling bias surrounding the US Dollar.
Meanwhile, a follow-through retracement in Oil prices, coupled with a modest USD uptick helped the pair to regain some positive traction on Wednesday, though lacked any strong bullish conviction ahead of the key data/event risk.
Wednesday’s economic docket highlights the release of the latest Canadian consumer inflation figures but the key focus will remain firmly on the highly anticipated FOMC policy decision, scheduled to be announced later during the US session.
Given that 25 bps interest rate cut is fully priced in the market, investors will closely scrutinize the accompanying policy statement, updated economic projections and the Fed Chair Jerome Powell’s comments at the post-meeting press conference.
Any hawkish, rather less dovish signals by the Fed will be enough to reignite the USD bullish trend, assisting the pair to build on its recent recovery move from multi-week lows and aim towards retesting the recent swing highs – around the 1.3380 region.
Technical levels to watch