USD/CAD tumbles toward 1.3350 after the Fed released dovish minutes

The US Dollar (USD) extended its losses vs. the Canadian Dollar (CAD), as Wall Street ended Wednesday's session in the green after the release of dovish Federal Reserve (Fed) November monetary policy minutes. Policymakers agreed to slow down the pace of rate hikes, so investors shifted to risk-perceived assets in the FX space, particularly the Canadian Dollar. At the time of writing, the USD/CAD is trading at 1.3349.

Federal Reserve minutes a headwind for the US Dollar

On Wednesday, the Federal Reserve revealed its latest minutes, which showed that officials are ready to begin hiking rates on smaller sizes after lifting rates by 75 bps four times in 2022. It should be noted that officials are unaware of where the Federal Funds rate (FFR) would peak, though most expressed that 5% could be the peak for some participants.

Mixed US economic data, another factor spurring USD weakness

Data-wise, S&P Global PMIs revealed for the US showed that the economy is slowing faster than expected, with Manufacturing, Services, and Composite Indices lying in contractionary territory. Aside from this, Consumer Sentiment remained positive, according to a University of Michigan (UOM) survey, at 56.9, above estimates but below the preliminary reading of November. Inflation expectations remained unchanged.

Earlier, the US economic docket featured Initial Jobless Claims for the last week, which jumped above expectations, flashing that the labor market is easing. At the same time, US Durable Good Orders for October rose sharply by 1% MoM, against 0.4% estimates, as consumers' resilience kept manufacturing activity from slowing down.

Of late, the Bank of Canada (BoC) Governor Tiff Macklem said that they expect rates to rise further. Macklem added that inflation in Canada remains high and broadens, reflecting increases in goods and services.

USD/CAD Price Analysis: Technical outlook

The USD/CAD resumed its downtrend after testing the head-and-shoulders neckline on Monday, though failure to crack it kept the chart pattern in play. Before the release of the Fed minutes, the USD/CAD registered a daily high of 1.3440 before diving toward its low of 1.3344. That said, the USD/CAD path of least resistance is downwards.

Therefore, the USD/CAD first support is 1.3300. Break below will expose the 100-day Exponential Moving Average (EMA) at 1.3264, followed by 1.3200.