- USD/CAD is lower again on Wednesday amid the onset of fresh dollar selling.
- The risk appetite boost turned out to be a key factor weighing on the greenback as a haven.
- Falling oil prices could undermine the loonie and limit losses ahead of the FOMC.
The pair USD/CAD meets a new offer on Wednesday and continues to lose ground during the first half of the European session. The pair fell to a fresh daily low, around the 1.2850-1.2845 region in the last hour, reversing a major part of the overnight recovery gains from the lowest level since June 13.
The recovery in risk sentiment globally, reflected in a generally positive tone in equity markets, weighs on the safe-haven US dollar. This turns out to be a key factor acting as a headwind for the USD/CAD pair, although low oil prices could undermine the commodity-linked loonie and help limit losses.
The black liquid has so far struggled to gain significant traction amid concerns about a weaker demand outlook and an impending Federal Reserve rate hike. That said, overnight US inventory drawdown data largely offset negative factors and offered some support for the commodity, at least for now.
Investors, for their part, also seem to refrain from making aggressive bets, preferring instead to wait for the outcome of the FOMC’s two-day policy meeting. The Fed will announce its decision later in the US session and is expected to raise interest rates by 75 basis points. However, investors remain divided on the need for more aggressive policy tightening.
Therefore, the market’s attention will be focused on the accompanying monetary policy statement. Aside from this, Fed Chairman Jerome Powell’s comments at the post-meeting press conference could provide further clues to the near-term policy outlook. This will play a key role in influencing the USD price dynamics and providing a new directional boost to the USD/CAD pair.
Therefore, it would be wise to wait for a strong sell-off before traders begin to position themselves for another short-term depreciation move. Key event risk from the central bank, US durable goods orders data and sentiment surrounding oil prices could help traders take advantage of short-term opportunities around the USD pair. /CAD
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
