USD/CAD clings to gains above 1.2700 mark, focus remains on FOMC

The USD/CAD pair edged higher through the Asian session and was last seen hovering near the top end of its daily trading range, around the 1.2720 region.

Following the previous day's sharp intraday pullback of nearly 100 pips from the 1.2780-85 zone, or over one-week tops, the pair managed to regain traction on Wednesday. The uptick marked the fourth day of a positive move in the previous five and was exclusively sponsored by a modest pickup in the US dollar demand.

Investors turned cautious amid doubts over the timing and size of a new stimulus package. The questions arose after Senate Majority Leader Chuck Schumer said that a comprehensive deal could be four to six weeks away. Moreover, Republicans have raised objections on the plan's expensive price tag of $1.9 trillion.

This comes amid growing worries about the potential economic fallout from the imposition of fresh restrictions to curb COVID-19 infections and dampened market mood. The lower risk appetite benefitted the greenback's relative safe-haven status and was seen as one of the key factors driving the USD/CAD pair higher.

The supporting factor, to some extent, was offset by a positive tone around crude oil prices, which underpinned the commodity-linked loonie and capped gains for the USD/CAD pair. Investors also seemed reluctant to place aggressive bets, rather preferred to wait on the sidelines ahead of the latest FOMC policy decision.

Apart from this, the broader market risk sentiment and the US stimulus headlines might also influence the USD price dynamics. In the meantime, the release of US Durable Goods Orders will be looked upon for some short-term trading opportunities later during the early North American session.

Technical levels to watch