USD/CAD prints a fresh three-week high around 1.2450 ahead of the FOMC meeting

USD/CAD climbs during the New York session, up 0.06%, trading at 1.2424 at the time of writing. As portrayed by European and US equity indices fluctuating between gainers and losers, the market sentiment is subdued ahead of the Federal Reserve meeting.

Also, retreating crude oil prices, with Western Texas Intermediate (WTI) falling almost 3.5%, undermined the oil-linked currency, acting as a headwind for the CAD. Nevertheless, the price action is to remain within narrow ranges, as the greenback keeps contained, showed by the US Dollar Index, at 94.11, barely up 0.02%.

US T-bond yields rise ahead of the FOMC, the 2-year almost at 0.50%

Meanwhile, the US 10-year Treasury yield advances two basis points, sitting at 1.566%, while the US 2-year Treasury yield, which could give hints of market participants' point of view about short-term interest rates, is at 0.48%, three basis points up.

Investors expect the Federal Reserve to announce the reduction of its pandemic Quantitative Easing program. The total amount of monthly purchases of about $120 billion is expected to be cut by $15 billion, as the US central bank looks to normalize monetary policy conditions. Once the statement is released, the focus would turn to the Fed Chairman Jerome Powell post-meeting press conference.

In the meantime, the US economic docket featured the US ADP report, which unexpectedly surprised markets, showed the creation of  571K jobs added to the economy against 400K foreseen by analysts. Furthermore, the ISM Services PMI for October rose to 66.7, higher than the 62 estimated, showing the resilience of the services sector amid COVID-19 lockdowns.

FX Market Reaction

The USD/CAD rose to 1.2450 on the economic releases, but retreated at current levels, as investors await the FOMC meeting.

USD/CAD Price Forecast: Technical outlook

The USD/CAD daily chart depicts a break above an ascending channel around 1.2420. The price is pushing towards the 200-day moving average (DMA) that lies at 1.2481, a crucial level to watch at 18:00 GMT when the Federal Reserve unveils its monetary policy statement. In the case of an upbreak above the 200-DMA, traders would expect the price to travel towards the 100-DMA around 1.2530, but first, the 1.2500 figure needs to be broken.

On the flip side, the 1.2400 area could be the area to defend for USD/CAD bulls. Once it is broken, the 1.2350 support level, where the price has been seesawing for two weeks, would be the next to be tested.

The Relative Strength Index (RSI) at 49 is slightly up. A pierce the 50 mid-line would confirm a bullish signal in case of opening fresh bids on the USD/CAD pair.