USD/CAD loses more than 100 pips, drops to mid-1.32s on Powell-led USD sell-off

• FOMC Chairman Powell says policy rate is ‘just below’ neutral estimates.
• US Dollar Index erases weekly gains, drops below 97.
• WTI looks to settle in red near $51.

After rallying to its highest level in five months at 1.3358, the USD/CAD pair reversed its direction in the last hours and lost more than 100 pips after FOMC Chairman Powell’s dovish comments on the  policy outlook triggered a heavy USD sell-off. As of writing, the pair was down 0.3% on the day at 1.3254.

While speaking at the Economic Club of New York luncheon, Powell, who argued that they were a long way from the neutral rate in late October, shifted his tone and said the policy rate was ‘just below’ their neutral estimates to put the greenback under pressure. Powell further added that they were close to price stability and maximum employment mandates while reminding that the Fed was not a pre-set policy path.

The US Dollar Index erased all of the gains it recorded since the start of the week on these comments and was last seen down 0.65% on the day at 96.75.

On the other hand, the barrel of West Texas Intermediate pulled away from the daily low that it set at $59.60 after the EIA report showed a higher-than-expected build in crude oil inventories and allowed  the commodity-related loonie to preserve its strength. At the moment, the WTI is trading at $51.30, losing 1.5% on a daily basis.

Technical levels to consider

The pair could face the next support at 1.3235 (Nov. 27 low) ahead of 1.3185 (Nov. 26 low) and 1.3125 (Nov. 16 low). On the upside, resistances are located at 1.3330 (Nov. 28 high), 1.3385 (Jun. 27 high/2018 high) and 1.3465 (Jun. 12, 2017, high).