USD/CAD advances to fresh session highs above 1.2740, eyes on FOMC

• USD/CAD is pushing higher ahead of the American session.
• US Dollar Index advances to 90.50 area ahead of FOMC’s policy announcements.
• WTI trades with modest losses near $52.50 on Wednesday.

After spending the Asian session in a very tight range below 1.2700, the USD/CAD pair gained traction during the European trading hours and touched a fresh daily high of 1.2744. As of writing, the pair was up 0.4% on the day at 1.2740.

DXY gathers bullish momentum on Wednesday 

The renewed USD strength seems to be fueling USD/CAD’s climb on Wednesday. The risk-averse market environment, as reflected by sharp declines in major European equity indexes and the US stock futures, is providing a boost to the safe-haven greenback. At the moment, the US Dollar Index (DXY) is up 0.37% on the day at 90.49 and the S&P 500 Futures are down nearly 1%.

In the meantime, the barrel of West Texas Intermediate (WTI) is losing 0.35% on the day near $52.50, making it difficult for the commodity-related loonie to stay resilient against the USD.

Later in the day, the Durable Goods Orders data will be featured in the US economic docket. However, the market reaction is likely to be muted with investors remaining on the sidelines ahead of the US Federal Reserve’s policy announcements. 

Previewing the FOMC’s January meeting, “the Federal Reserve is set to leave its bond-buying plan unchanged and signal a steady hand,” noted FXStreet analyst Yohay Elam. “By calling for fiscal stimulus, the bank may hint it is ready to scoop up debt, boosting shares.”

Fed Preview: Fearing market froth or boosting Biden’s stimulus? Three scenarios.

Technical levels to watch for