USD/CAD gathers strength for a break above 1.3600 despite dovish FOMC minutes

The USD/CAD pair is showing a back-and-forth action after reaching near the round-level resistance of 1.3600 in the early Toyo session. The Loonie asset is expected to add more gains as the US Dollar Index (DXY) is aiming to extend the upside further towards 104.00.

S&P500 witnessed a sell-off on Wednesday as fears of a US default are deepening further. Negotiations among the White House and Republicans remained positive on Wednesday, according to House of Representatives Speaker Kevin McCarthy, however, until an agreement of bipartisan remains absent, investors would remain worried. Therefore, the overall market mood is quite negative.

The US Dollar Index (DXY) has refreshed its two-month high above 103.92 as the United States economy is swiftly approaching a default situation. Although developments over US borrowing cap negotiations remained positive, the White House accused Republicans of taking the economy hostage to advance an agenda they could otherwise not pass, as reported by Reuters.

Meanwhile, the release of the dovish interest rate guidance in Federal Open Market Committee (FOMC) minutes failed to impact US Dollar’s rally. The FOMC minutes cleared that Federal Reserve (Fed) policymakers agreed that more interest rate hikes are less certain due to a potential banking crisis.

On the oil front, the upside of the oil price seems restricted around $74.50 despite the United States Energy Information Administration (EIA) has reported a sharp drawdown in oil inventories for the week ending May 19. The oil stockpiles dropped by 12.456 million barrels while the street was anticipating a mild build-up.

It is worth noting that Canada is the leading exporter of oil to the United States and restrictions on the upside for the oil price will have an impact on the Canadian Dollar.