USD/CAD steadily climbs back closer to mid-1.2800s ahead of US data/FOMC minutes

Following the overnight pullback from a multi-day peak, the USD/CAD pair attracted fresh buying on Wednesday and maintained its bid tone through the first half of the European session. The pair was last seen trading just below mid-1.2800s, up nearly 0.20% for the day.

The US dollar staged a solid recovery from a fresh monthly low touched the previous day, which, in turn, was seen as a key factor that pushed the USD/CAD pair higher for the second straight day. Despite signs of stability in the financial markets, the worsening global economic outlook extended some support to the safe-haven greenback.

Apart from this, the strong intraday USD move up could further be attributed to some repositioning trade ahead of the FOMC meeting minutes, due for release later during the US session. Given that a 50 bps Fed rate hike at the next two meetings is fully priced in, investors will look for clues about the possibility of a jumbo rate hike in June.

Heading into the key event risk, the US Durable Goods Orders might provide some impetus during the early North American session. In the meantime, the underlying bullish sentiment surrounding crude oil prices could lend some support to the commodity-linked loonie and act as a headwind for the USD/CAD pair, warranting caution for aggressive bulls.

Hence, it will be prudent to wait for strong follow-through buying beyond the overnight swing high, around the 1.2870-1.2875 region, before confirming that the USD/CAD pair has bottomed out. The subsequent move up could push spot prices to the 1.2900 mark, which if cleared decisively would set the stage for a further near-term appreciating move.

Technical levels to watch