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USD/CAD consolidates in a range, awaits Wednesday’s key events

  • Tempered Fed rate cut expectations/surging US bond yields underpinned the USD.
  • Loonie benefits from a strong pickup in Oil prices and kept a lid on any strong gains.
  • The focus remains on Powell’s testimony, BoC policy decision and FOMC minutes.

The USD/CAD pair lacked any firm directional bias on Wednesday and was seen oscillating in a narrow trading band, just below mid-1.3100s.

The pair struggled to build on its recent recovery move from multi-month lows, with a combination of diverging forces failing to provide any meaningful impetus and leading to a subdued/range-bound price action through the early European session on Wednesday.

As investors continue to scale back expectations for aggressive Fed rate cuts, a strong follow-through upsurge in the US Treasury bond yields helped the US Dollar to preserve its recent gains to near three-week tops and extended some support to the major.  

The positive factor was largely offset by a goodish pickup in Crude Oil prices, which underpinned demand for the commodity-linked currency – Loonie and turned out to be one of the key factors keeping a lid on any strong follow-through appreciating move.

In fact, WTI Crude Oil rallied nearly 1.5% on Wednesday in reaction to the overnight report that showed US stockpiles fell far more than expected and got an additional boost by the fact that major US producers evacuated rigs in the Gulf of Mexico ahead of a brewing storm.

This coupled with reluctant to place any aggressive bets ahead of Wednesday’s key event risks – the Fed Chair Jerome Powell’s highly anticipated congressional testimony and the latest BoC monetary policy update, further collaborated to the lacklustre trading action.

Later during the US trading session, the release of June FOMC meeting minutes might influence the USD price dynamics and produce some meaningful trading opportunities, though traders are likely to wait for a sustained move in either direction positioning for the near-term trajectory.

Technical levels to watch

 

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