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  • USD/CAD managed to attract some dip-buying and staged a solid intraday bounce.
  • Weaker crude oil prices undermined the loonie and helped limit the early downtick.
  • A sudden spike comes on the back of some repositioning trade ahead of the FOMC.

The USD/CAD pair jumped around 65-70 pips during the early North American session and refreshed session tops, around the 1.3435-40 region in the last hour.

The pair showed some resilience at lower levels and quickly reversed an early dip back closer to multi-month lows, around mid-1.3400s set earlier this week. The early downtick remained cushioned amid a weaker tone surrounding crude oil prices, which tend to undermine demand for the commodity-linked currency – the loonie.

Bulls, however, seemed reluctant on the back of a sustained US dollar selling bias, which remained unabated following the release of softer-than-expected US consumer inflation figures for May. Meanwhile, the latest leg of a sudden spike could be solely attributed to some repositioning trade ahead of the FOMC.

The Fed is scheduled to announce its monetary policy decision on Wednesday and is widely expected to leave interest rates unchanged at the end of a two-day meeting. Hence, the key focus will be on the accompanying policy statement and the latest set of inflation/economic growth projections, so-called ‘dot-plot’.

This will be followed by the Fed Chair Jerome Powell’s comments at the post-meeting press conference. Investors will closely scrutinize Powell’s remarks for clues about the central bank’s future policy path, which will drive the near-term sentiment surrounding the USD and provide a fresh directional impetus for the USD/CAD pair.

Technical levels to watch