USD/CAD bulls move in but face pressures below key resistances

The Canadian dollar weakened on Wednesday against the greenback and all the other G10 currencies as oil prices fell. USD/CAD is up 0.3% having travelled between a low of 1.3356 and a high of 1.3440 on the day so far ahead of a parliamentary appearance by Bank of Canada Governor Tiff Macklem and the Federal Open Market Committee minutes. 

The Loonie was pressured despite US dollars moving lower that followed a slew of US economic data (including durable goods orders, PMIs, claims, new home sales, and final Michigan sentiment). The data, for the most part, was solid but the emphasis was put on the shocking result in the US Manufacturing PMI that missed expectations by a mile:

US: S&P Global Manufacturing PMI drops to 47.6 in November vs. 50 expected

Nevertheless, the price of oil has blown off to the downside on Wednesday as China continues to struggle with rising Covid-19 infections, imposing mass testing and lockdown measures, lowering economic growth and cutting demand for oil from the world's No.1 importer. At the same time, the European Union readies to impose a price cap on Russian oil exports. Additionally, a report showed a larger-than-expected drop in US inventories.

Besides the FOMC minutes, Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers will appear before the House of Commons Standing Committee on Finance at 4:30 p.m. ET (2130 GMT).

FOMC minutes eyed

The PMI data today has given the US Dollar bears a head start before the FOMC minutes are released. Firstly, the recent cooler-than-expected US Consumer Price data has already created sentiment for a Fed pivot and investors' hopes that the central bank may be in a position to moderate its pace of hikes. In the prior statement, it read "In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

This statement gave rise to volatility in markets as investors positioned for a softer approach from the Fed which Chair Jerome Powell pushed back against in his presser by suggesting that there will likely be a higher terminal rate. Therefore, the minutes will be scrutinised for clarity in this regard. ''We expect the November FOMC meeting minutes to shed further light on the FOMC's deliberations regarding the expected downshift in the pace of rate increases in upcoming meetings,'' analysts at TD Securities said. 

''But above all, we look for the minutes to place a lot of emphasis on the likelihood that the terminal rate will need to end up higher than anticipated initially. The Fed still needs to grind down the labour market to align wage and household spending growth with rates more consistent with the inflation target.''

In such a scenario, this could put a bid into the US Dollar that has been downtrodden ahead of the event. Nevertheless, USD/CAD is on the backside of a trend and below a topping pattern daily charts as the following illustrate:

USD/CAD technical analysis

The pair has broken the trendline this month and has corrected back into the resistance with prospects of a downside continuation as illustrated on the following hourly chart also: