- The ongoing slump in Oil prices undermine Loonie and lend some support.
- The USD remains on the defensive amid firming Fed rate cut expectations.
- Traders now eye Wednesday’s US consumer inflation data for a fresh impetus.
The USD/CAD pair held on to its mildly positive tone through the early European session on Wednesday, albeit remained capped below the previous session's swing high.
After a rather subdued action through the major part of Tuesday's trading session, the pair witnessed a surprise move to the upside and was being supported by weaker Crude Oil prices. A weaker demand outlook, coupled with an unexpected rise in the US inventories weighed on Oil and undermined demand for the commodity-linked currency - Loonie.
The positive move, however, lacked any strong bullish conviction and failed to sustain above the 1.3300 handle in the wake of the US President Donald Trump's efforts to talk down the domestic currency. Trump said that other currencies are undervalued against the US Dollar and also complained that the Fed was keeping interest rates way too high.
The comments further reaffirmed market expectations for an eventual Fed rate cut action by the end of this year and kept the USD bulls on the defensive, failing to assist the pair to build on the positive momentum despite a follow-through slump in Oil prices on Wednesday. Hence, it would be prudent to wait for a strong follow-through buying before confirming that the pair might have actually bottomed out in the near-term or positioning for any further appreciating move.
Later during the early North-American session, the US economic docket - highlighting the release of the latest consumer inflation figures, will now be looked upon to grab some meaningful trading opportunities. In the meantime, the USD/Oil price dynamics might continue to act as key determinants of the pair's momentum on Wednesday.
Technical levels to watch
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