USD/CAD drops to 1.30 as greenback weakens ahead of FOMC
|- The USD/CAD pair struggles to preserve its bullish momentum above 1.30.
- DXY turns negative below 93.70 in the early NA session ahead of FOMC.
- May PPI figures from the US surpass the expectations.
The USD/CAD pair started the day on a positive note on Wednesday and advanced to its best level in 8 days at 1.3045 before losing its traction. At the moment, the pair is trading at a fresh session low of 1.2997, where it's losing 0.14% on the day.
The pair's price action continues to be dominated by the greenback strength. On Tuesday, reports of the Fed Chairman Powell considering having a press conference after every meeting woke up the USD buyers as it suggested that the FOMC may be looking to make more rate hikes in the remainder of the year than initially anticipated. However, the US Dollar Index failed to break above the 94 mark as investors didn't want to commit to large positions ahead of today's meeting.
Meanwhile, the only data release from the United States showed that the PPI increased by 0.5% and 3.1% on a monthly and yearly basis respectively, both readings beating the market expectations.
On the other hand, the API's weekly report yesterday showed a surprise increase in the crude oil inventories in the U.S. and forced the barrel of WTI to turn negative in the post-settlement trade. Later in the session, the EIA is going to release the oil inventory figures and another buildup could continue to weigh on crude oil prices and hurt the demand for the commodity-linked loonie to help the pair limit its losses.
Touching on today's FOMC meeting, “the big if for markets is whether the dot plot will signal three or four hikes in total for 2018. A tipped balance in favour of hikes in the dot plot will likely spur a yield-positive repricing of the Fed Funds futures and likely also at least initially a moderately USD positive move in the FX space,” Nordea Markets researchers argued.
Technical outlook
If the pair stays below 1.3000 (psychological level) at the end of the day, it could continue to push lower toward 1.2945 (20-DMA) and 1.2865 (50-DMA). On the upside, resistances are located at 1.3045 (daily high), 1.3100 (psychological level) and 1.3125 (Mar. 19 high).
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