- The USD / CAD struggled to capitalize on the bullish move overnight and held below 1.2200.
- Bullish crude oil prices, stronger Canadian CPI figures supported the loonie and limited gains.
- The slide remains muffled as investors seemed reluctant ahead of the FOMC’s key decision.
The pair USD / CAD it remained on the defensive, around the 1.2175-80 region and had a rather subdued reaction to the Canadian CPI report.
Having struggled to find acceptance / seize momentum beyond the 1.2200 mark, the USD / CAD pair turned down on Wednesday and was pressured by a combination of factors. Crude oil prices prolonged the recent strong bull streak and rose to new multi-year highs. This, coupled with mostly upbeat Canadian inflation figures, supported the commodity-linked loonie.
Data released by Statistics Canada revealed that the main Canadian CPI held steady at 0.5% in May and increased to 3.6% on an annual basis from 3.4% previously. This was slightly better than the 3.5% expected. Added to this, the Bank of Canada’s (BoC) core CPI (excluding volatile food and energy prices) also beat consensus estimates, rising to 2.8% from 2.3% in April.
On the other hand, the US Dollar witnessed moderate / in-range price action as investors appeared reluctant to place aggressive bets ahead of the highly anticipated FOMC policy decision. That said, expectations of a less dovish Fed helped put a tentative bottom under the dollar. This, in turn, extended some support to the USD / CAD pair and helped limit any significant declines.
The market may have already begun to assess the prospects for a withdrawal from the previous stimulus amid concerns about rising inflationary pressure. Therefore, investors will be on the lookout for clues if members have already started the discussion to slow down from the current $ 120 billion in monthly bond purchases. Apart from this, the updated economic projections and the tone of Fed Chairman Jerome Powell in the post-meeting press conference will influence the short-term USD price dynamics.
Technical levels
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