USD/CAD consolidates below 18-month tops, Canadian CPI/FOMC awaited
• Uncertainty over the Fed’s rate hike path in 2019 kept the USD bulls on the defensive.
• A modest rebound in crude oil prices underpinned Loonie and exerted some pressure.
• Today’s Canadian inflation figures/FOMC decision eyed for a fresh directional impetus.
The USD/CAD pair traded with a mild negative bias on Wednesday and was seen oscillating in a narrow trading band, around mid-1.3400s.
A late US Dollar rebound supported by upbeat US housing market data, coupled with the overnight plunge in oil prices provided a strong boost and lifted the pair to the vicinity of the key 1.3500 psychological mark.
The USD bulls, however, struggled to shake off expectations that the Fed will slow the pace, or even halt its monetary policy tightening in 2019 and eventually kept a lid on any strong follow-through.
Adding to this, a modest rebound in crude oil prices extended some additional support to the commodity-linked currency - Loonie and further collaborated to the pair's weaker tone through the Asian session on Wednesday.
Despite a combination of negative forces, the downside seemed limited as traders might be reluctant to place any aggressive bets ahead of today's key data/event risk from Canada and the US.
The FOMC is scheduled to announce its latest monetary policy decision later in the day and will also release updated economic projections, which will play an important role in driving the greenback in the near-term.
Ahead of the highly anticipated event, Canadian economic docket highlights the release of consumer inflation figures for November and influence the pair's momentum during the early North-American session.
Technical levels to watch
Any meaningful up-move now seems to confront resistance near the 1.3485 region, above which the pair is likely to surpass the 1.3500 handle and test the 1.3535-40 supply zone. On the flip side, the 1.3425-20 region now seems to protect the immediate downside and is closely followed by the 1.3400 handle, which if broken might accelerate the slide further towards the 1.3350-40 support area.