USD/CAD treading water around 1.2500, FOMC on sight

The greenback is alternating gains with losses on Wednesday, with USD/CAD so far in a sideline theme around the 1.2500 handle.

USD/CAD attention to FOMC

The pair seems to have found some support in the 1.2480 area recorded yesterday, levels last traded in early May 2016, while the door remains open for a test of 2016 lows at 1.2458 should USD weakness resurfaces.

US political jitters and a potential more gradual approach to the tightening cycle from the Federal Reserve, on the USD-side; while stronger fundamentals and a hawkish Bank of Canada, on the CAD-side, has been behind the sharp drop in spot, which is down more than 9% since YTD tops in the boundaries of 1.3800 the figure seen in May.

In the meantime, US-CA yield spread differentials stay as the almost exclusive driver of the pair’s price action in the near term, relegating crude oil dynamics to a secondary role.

In the US data space, new home sales for the month of June are due seconded by the EIA’s weekly report on crude oil supplies, all ahead of the FOMC meeting.

USD/CAD significant levels

As of writing the pair is retreating 0.04% at 1.2504 facing the next support at 1.2478 (2017 low Jul.25) followed by 1.2458 (2016 low May 3) and then 1.2124 (monthly low Jun.18 2015). On the flip side, a breakout of 1.2599 (10-day sma) would aim for 1.2775 (21-day sma) and finally 1.2789 (23.6% Fibo of the 2017 drop).