USD/CAD remains depressed below 1.2800 mark, focus on FOMC decision

A combination of factors prompted fresh selling around USD/CAD on Wednesday.
Bullish oil prices underpinned the loonie and exerted pressure amid weaker USD.
Hawkish Fed expectations acted as a tailwind for the USD and helped limit losses.
The market focus remains glued to the outcome of a two-day FOMC policy meeting.

Haresh Menghani FXStreet

The USD/CAD pair maintained its offered tone through the first half of the European session, albeit has managed to rebound few pips from daily lows. The pair was last seen trading just below the 1.2800 mark, down over 0.15% for the day.

A combination of factors failed to assist the USD/CAD pair to capitalize on the previous day's rebound from the 1.2745-40 region, instead prompted fresh selling on Wednesday. The risk-on impulse in the markets weighed on the safe-haven US dollar. Apart from this, bullish oil prices underpinned the commodity-linked loonie and exerted some pressure on the major.

China's struggling property giant Evergrande Group said it would pay the bond interest due on Thursday and eased immediate fears about a messy corporate collapse. This, in turn, boosted the global risk sentiment, which was evident from a generally positive tone around the equity markets and dented demand for the perceived safe-haven greenback.

Meanwhile, crude oil prices built on the overnight modest gains and rallied around 1.5% on Wednesday amid signs of tight supply and improving demand. Tuesday's figures from the American Petroleum Institute (API) showed US crude stocks fell by 6.1 million barrels last week. Traders now look forward to the official data on Wednesday to confirm the drop.

Nevertheless, rising crude oil prices acted as a tailwind for the Canadian dollar and contributed to the USD/CAD pair's intraday decline. The downside, however, seems limited as investors might refrain from placing aggressive bets ahead of the crucial outcome of a two-day FOMC monetary policy meeting. The Fed is scheduled to announce its decision later during the US session.

Investors will look for clues about the likely timing of the Fed's tapering plan. Apart from this, the updated economic projections and the so-called dot plot will play a key role in influencing the greenback in the near term. This, along with oil price dynamics, should help determine the next leg of a directional move for the USD/CAD pair.

Technical levels to watch

USD/CAD

Overview
Today last price	1.2796
Today Daily Change	-0.0027
Today Daily Change %	-0.21
Today daily open	1.2823

Trends
Daily SMA20	1.2656
Daily SMA50	1.2612
Daily SMA100	1.2416
Daily SMA200	1.2525

Levels
Previous Daily High	1.2848
Previous Daily Low	1.2743
Previous Weekly High	1.2774
Previous Weekly Low	1.2601
Previous Monthly High	1.2949
Previous Monthly Low	1.2453
Daily Fibonacci 38.2%	1.2783
Daily Fibonacci 61.8%	1.2808
Daily Pivot Point S1	1.2761
Daily Pivot Point S2	1.2699
Daily Pivot Point S3	1.2656
Daily Pivot Point R1	1.2867
Daily Pivot Point R2	1.291
Daily Pivot Point R3	1.2972

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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