- Sustained USD selling bias prompted some fresh selling around USD/CAD on Wednesday.
- Weaker oil prices undermined the loonie and might help limit deeper losses for the pair.
- Investors now eye US CPI figures for some impetus ahead of the FOMC policy decision.
The USD/CAD pair traded with a mild negative bias through the early European session, albeit has managed to rebound over 25 pips from daily swing lows.
The pair met with some fresh supply on Wednesday and reversed the previous day’s attempted recovery move. The pair on Tuesday struggled to find acceptance above the very important 200-day SMA and has now dropped back closer to three-month lows.
The US dollar the bearish pressure remained unabated through the first half of Wednesday’s trading session, instead was further fueled by the ongoing slide in the US Treasury bond yields amid the possibility of a dovish outlook from the Fed.
A broad-based USD weakness was seen as one of the key factors exerting some pressure on the USD/CAD pair. However, a weaker tone surrounding crude oil prices undermined the commodity-linked currency – the loonie – and helped limit deeper losses.
Oil prices were down around 2.5% on Wednesday amid the fading optimism about a swift recovery in demand led by the easing of lockdown restrictions. Investors also seemed unconvinced that a one-month output cut extension might be enough to offset oversupply in the market.
It will now be interesting to see if the pair is able to attract any meaningful buying interest or continues with its subdued trading action. The focus now shifts to Wednesday’s US consumer inflation figures, which might provide some impetus ahead of the FOMC policy update.
The Fed is scheduled to announce its decision later this Wednesday and is expected to leave interest rates unchanged. Investors will also scrutinize the accompanying policy statement and the Fed Chair Jerome Powell’s comments at the post-meeting press conference.
Technical levels to watch
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