USD/CAD recovers to 1.37 ahead of FOMC on weaker oil

After dropping to a fresh session low at 1.3683, the USD/CAD pair started to recover its daily losses towards the 1.37 handle after crude oil prices faced some selling pressure and hurt the demand for the loonie. As of writing, the pair was trading at 1.37, still down 0.1% on the day.

The latest weekly EIA report showed that the U.S. commercial crude oil inventories contracted by 0.9 million barrels from the previous week. The initial reaction following the report pulled down the price of the barrel of WTI to a fresh monthly low at $47.30. At the moment, the barrel of WTI is trading at $47.50, losing 0.35%.

• WTI testing weekly lows post-EIA

Earlier in the session, the ADP private-sector employment report came in at 177K, just a tad above the expectation of 175K, but still recorded a heavy drop in April from March's 255K. The US Dollar Index's reaction to the data remained limited as the markets remained focused on today's big event, FOMC monetary policy decision. At 18:00 GMT, the Fed will be releasing its interest rate decision accompanied by a monetary policy statement. Investors will be looking for clues regarding the timing of the next rate hike. Furthermore, it will be interesting to see how the Fed assesses the recent weak macro data and their impact on the tightening path.

• FOMC: Market participants to look for changes in timing of policy guidance – Westpac

Technical outlook

1.3735 (2016, Feb. 25 high) is seen as the first technical resistance for the pair ahead of 1.38 (psychological level) and 1.3860 (2016, Feb. 24 high). To the downside, supports align at 1.3600 (psychological level/Dec. 28 high), 1.3540 (Apr. 27 low) and 1.3410 (Apr. 24 low).