USD/CAD drops to fresh session lows, weighed down by rallying oil prices

The USD/CAD pair maintained its offered tone through early NA session and is currently placed near session lows, below mid-1.2200s.

The pair extended overnight rejection slide from the 1.2300 handle and was being weighed down by weaker sentiment around the US Dollar. The greenback remained broadly lower on Wednesday as investors refrained from placing any aggressive bets and preferred to wait for the outcome of a two-day FOMC monetary policy meeting.

This coupled with a strong rally in crude oil prices, in wake of growing hopes for a possible extension by more than three months of oil production cuts agreement that expire in March 2018, was seen benefitting the commodity-linked currency - Loonie and further contributed to the pair's offered tone. 

Investors' focus would remain glued to the highly anticipated Fed decision, which would be driving the greenback in the near-term and eventually provide fresh impetus for the pair's next leg of directional move.

   •  Fed: No major changes to inflation wordings despite low inflation – Danske Bank

Ahead of the key event risk, traders will take cues from the release of existing home sales and EIA crude oil inventories data from the US. 

Technical levels to watch

Immediate support is pegged near 1.2220 level, below which the pair is likely to fall back below the 1.2200 handle and test its next horizontal support near the 1.2180-75 region. 

On the upside, any up-move beyond 1.2280 level might continue to confront fresh supply near the 1.2300 handle. Even if the pair manages to clear this barrier, any subsequent moves might remain capped near 1.2335-40 supply zone.