During Wednesday's European trading session, the USD/CAD currency pair flashed modest losses and dropped just below 1.3400 marks, while representing 0.11% losses on the day mainly due to the broad-based US dollar weakness as investors cautious ahead of the latest meeting of the Federal Reserve.
On the other hand, the declines in the crude oil undermining the loonie and turned out to be one of the key factors that kept a lid on any additional gains in the pair, at least for now. Currently, the USD/CAD currency pair is currently trading at 1.3403 and consolidates in the range between the 1.3368 - 1.3429.
The commodity currency faced some fresh selling bias on the day and halted the previous day's attempted recovery move. The USD/CAD struggled to find acceptance above the very important 200-day SMA on Tuesday and has now dropped back closer to 3-month lows.
At the USD front, the broad-based US dollar reported losses on the day caused by the continuing declines in the US Treasury bond yields due to the possibility of a dovish outlook from the Federal Reserve monetary policy decision. The Fed will likely announce measures to control the recent rise in bond yields, which will likely push the dollar down further. Whereas, the US dollar index, which tracks the greenback against a basket of six other currencies, was bearish by 0.1% at 96.233, around levels not seen since early March.
At the oil front, the weaker tone surrounding crude oil prices weakened the commodity-linked currency the Canadian dollar and helped limit deeper losses in the currency pair. However, the decline in crude oil could be attributed to the declining optimism about a swift recovery in demand led by the easing of lockdown restrictions.
The investors also think that the one-month output cut extension will not be enough to control oversupply in the market, which also exerted some downside pressure on the crude oil. The pair can attract any meaningful bids or continues with its weaker trading action. Moving on, the traders focus now shifts to Wednesday's US consumer inflation figures, which might provide some impetus ahead of the FOMC policy update. The Fed is scheduled to report its decision later this Wednesday and is expected to leave interest rates unchanged.
Daily Support and Resistance
Pivot Point 1.3393
The USD/CAD is consolidating in a tight trading range of 1.3490 - 1.3374 level, and violation of these levels will determine the further trend in the USD/CAD pair. On the 4 hour chart, the downward channel is suggesting chances of bearish bias in the market, which is providing resistance at 1.3490, and the support holds around 1.3245. But the immediate double bottom support level of 1.3375 level needs to be violated before we see further selling in the USD/CAD prices. Let's look for selling trade below 1.3370 level today. Good luck!