USD/CAD drops to 1.3160 area as focus shifts to FOMC

• USD/CAD struggles to make a decisive move in either direction.
• US Dollar Index struggles to hold above 93.00.
• Investors wait for FOMC’s Interest Rate Decision and Monetary Policy Statement.

The USD/CAD pair gained traction in the early American session and climbed toward 1.3200. However, the pair struggled to preserve its momentum and was last seen losing 0.15% on the day at 1.3162.

DXY retreats below 93.00 after modest rebound

Earlier in the day, the data published by Statistics Canada showed that the annual Consumer Price Index (CPI) in Canada remained unchanged at 0.1% in August. On the other hand, Retail Sales in the US increased by 0.6% and the NAHB Housing Market Index improved to 83 and beat the market expectation of 78.

Nevertheless, the market reaction to these data was mixed with investors opting out to remain on the sidelines while waiting for the FOMC to announce its policy decisions following the September meeting.

The US Dollar Index, which dropped below 92.80 earlier in the day, turned positive above 93.00 in the last hour but returned to 92.90 area, reaffirming the indecisive market action. 

Previewing this key event, “given the fact that markets do not expect the Fed to tighten monetary policy anytime soon, the FOMC may not be in a hurry to provide specific numbers or dates,” said Rabobank analysts. “A significant setback in the economic recovery would force the Fed to rethink its monetary policy stance.” 

Federal Reserve Preview: 15 major banks expectations.

Meanwhile, the barrel of West Texas Intermediate is gaining more than 3% on Wednesday, helping the commodity-sensitive CAD stay resilient against its rivals.

Technical levels to watch for