USD/CAD jumps to over one-week high, bullish Oil prices to cap gains ahead of FOMC minutes

The USD/CAD pair attracts fresh buying on Wednesday and climbs to a one-and-half-week high, around mid-1.3500s during the first half of the European session.

A combination of supporting factors pushes the US Dollar (USD) to a fresh two-month high, which, in turn, acts as a tailwind for the USD/CAD pair. The recent hawkish remarks by a slew of influential Federal Reserve (Fed) officials reaffirmed market expectations that the US central bank will keep interest rates higher for longer. In fact, the markets have started pricing in the possibility of another 25 bps lift-off in June. This, along with a generally weaker risk tone, further benefits the Greenback's relative safe-haven status.

The market sentiment remains fragile amid worrying signs of slowing global economic growth, particularly in China, and US debt ceiling woes. In fact, data from China last week indicated that the world's second-largest economy underperformed in April. Furthermore, representatives of President Joe Biden and congressional Republicans ended another round of debt ceiling talks without an agreement to raise the government's borrowing limit. This tempers investors' appetite for riskier assets and drives some haven flows.

It, however, remains to be seen if bulls can capitalize on the move amid a further rise in Crude Oil prices, which tends to benefit the commodity-linked Loonie. In fact, US West Texas Intermediate (WTI) Crude rallied nearly 2% intraday, to over a three-week high after Saudi Arabia's energy minister warned that short sellers should watch out for pain, fueling speculations for further OPEC+ output cuts. This, in turn, warrants some caution before placing fresh bullish bets around the USD/CAD pair and positioning for further gains.

Market participants might also prefer to wait on the sidelines ahead of the release of the FOMC meeting minutes, due later during the US session. The minutes will be closely scrutinized for clues about the Fed's future rate-hike path, which, in turn, will influence the USD demand in the near term and help investors to determine the next leg of a directional move for the USD/CAD pair. Apart from this, Oil price dynamics might further contribute to producing short-term trading opportunities around the major.

Technical levels to watch