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1 Feb 2023

USD/CAD hangs near two-and-half-month low, around 1.3300 ahead of US data, FOMC

  • USD/CAD seesaws between tepid gains/minor losses heading into the North American session.
  • A modest uptick in oil prices underpins the Loonie and acts as a headwind amid a weaker USD.
  • Traders now look to the US macro data for some impetus ahead of the critical FOMC decision.

The USD/CAD pair attracts some intraday sellers following an early uptick to the 1.3325 area and drops to its lowest level since November 16 on Thursday. Spot prices, however, recover a few pips and hold steady above the 1.3300 mark heading into the North American session.

A modest uptick in crude oil prices underpins the commodity-linked Loonie, which, along with a modest US Dollar weakness, acts as a headwind for the USD/CAD pair. The upside for the black liquid, meanwhile, remains capped amid expectations that OPEC+ will endorse their current output targets. Apart from this, the prevalent cautious market mood lends some to the safe-haven greenback and contributes to limiting the downside for the major, at least for now.

Traders also seem reluctant to place aggressive directional bets and prefer to wait on the sidelines ahead of the highly-anticipated FOMC monetary policy decision. The US central bank is widely expected to slow the pace of its policy tightening further and hike interest rates by 25 bps points. That said, the recent US macro data pointed to an economy that is resilient despite rising borrowing costs and backed the case for the Fed to stick to its hawkish stance.

Hence, the focus will be on the accompanying monetary policy statement and Fed Chair Jerome Powell's remarks at the post-meeting press conference. Investors will look for cues about the future rate-hike path, which will play a key role in influencing the USD. Heading into the key central bank event risk, traders will look to the US economic docket - featuring the release of the ADP report on private-sector employment, ISM Manufacturing PMI and JOLTS Job Openings.

Technical levels to watch

 

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