USD/CAD hangs closer to Tuesday’s multi-month lows, just above 1.32 mark

The USD/CAD pair remained under some selling pressure for the fourth consecutive day and held within striking distance of 2-1/2 month lows touched in the previous session.

Spot continued with its bearish slide from levels beyond the key 1.35 psychological mark, touched last week, and dropped over 300-pips in just four trading session in wake of the latest hawkish rhetoric from BOC Governor Stephen Poloz and Deputy Governor Carolyn Wilkins. 

The comments reflected central bank's confidence in the Canadian economy and hinted towards a shift in its monetary policy outlook. Increasing odds for a BOC rate-hike action before the end of this year has been a key factor for the pair's slump since the beginning of this week. 

Moving ahead, investors would remain focused on the much awaited FOMC announcement, due later during the NY trading session. The Fed seems all set to raise interest rates by 25bps points, but given the recent US data-disappointment, the accompanying statement might imply a more dovish policy path. Dampening expectations for a faster Fed rate-tightening cycle would turn the US Dollar vulnerable to extend its recent downward trajectory and continue exerting a follow through selling pressure around the major. 

   •  Potential for the USD to rally out of the FOMC - NAB

Ahead of the FOMC announcement, traders would confront the release of latest CPI print and monthly retails sales data from the US, and grab some short-term trading opportunities.  

   •  Key US data previews: Fed, retails sales, CPI - Nomura

Technical levels to watch

A follow through weakness below the 1.3200 handle, leading to a subsequent drop below 1.3185-80 horizontal support, is likely to accelerate the downslide further towards its next support near 1.3150-45 region. On the flip side, any recovery move beyond 1.3240-45 area now seems to face some fresh supply near the 1.3300 handle, which if cleared might trigger a short-covering rally towards 1.3385 intermediate resistance ahead of the 1.3400 round figure mark.