USD/CAD extends recovery move ahead of BoC and FOMC minutes

The USD/CAD pair extended previous session's recovery move from one-month lows and built on to its momentum back above the key 1.3500 psychological mark.

Currently trading at 3-day tops, around 1.3540 region, the pair has now recovered over 80-pips from yesterday's swing lows near mid-1.3400s and the up-move could be attributed to some short-covering ahead of FOMC meeting minutes and BoC decision. Heading into the key event risks, bears seemed inclined to lighten their position, especially after the pair's recent slide of nearly 350-pips from 1.3800 neighborhood touched earlier this month. 

Despite of the recent data-disappointment from the US, which seems to have dampened expectations for aggressive Fed rate-tightening cycle through 2017, investors seemed convinced that the central bank would eventually move towards raising rates at its June meeting. Hence, today's release of the minutes from the FOMC May meeting would be looked upon to reaffirm market expectations for June Fed rate-hike action. 

   •  CME Group FedWatch's June hike probability leaped above 80%

On the other hand, the BoC is widely expected to maintain status quo but the accompanying monetary policy statement could trigger some volatile moves around CAD crosses. 

   •  BoC to retain its current cautiousness with rates remaining on hold - BBH

Meanwhile, the prevalent bullish sentiment surrounding oil markets extended some support to the commodity-linked curreny - Loonie, and seems to contribute towards limiting further up-move for the major, at least for the time being. In fact, WTI crude oil held on to its gains near multi-week tops, above $51.00/barrel, as focus now shifts to the keenly watched OPEC meeting on Thursday, which would also help the pair's next leg of directional move. 

Technical levels to watch

A follow through buying interest has the potential to continue boosting the pair further towards its next hurdle near the 1.3600 handle, above which the recovery move could get extended towards mid-1.3600s. On the downside, the 1.35 handle now becomes immediate support to defend, which if broken would turn the pair vulnerable to break below one-month lows support near mid-1.3400s and head towards testing its next support near 1.3420-15 area.