USD/CAD remains subdued above 1.2900 as focus shifts to Fed policy, oil rebounds

• USD/CAD has turned sideways above 1.2900 amid anxiety over Fed’s interest rate policy.
• Price pressures have not found exhaustion while slowdown signals have triggered meaningfully.
• Oil prices will remain vulnerable as odd of a slowdown in the global economy has soared.

The USD/CAD pair is facing barricades around 1.2920 after failing to sustain above the same. The asset is experiencing selling pressures and is likely to witness a downside as investors are shifting their focus toward the interest rate decision by the Federal Reserve (Fed). On a broader note, the asset has remained sideways in a 1.2855-1.2937 range but rebounded sharply on Friday after defending the weekly support.

The US dollar index (DXY) is expected to remain subdued as the Federal Reserve (Fed) is going to dictate the monetary policy on Wednesday. A rate hike announcement is imminent as price pressures are still hurting the households in the US economy. However, the focus will remain on the extent of the same. Odds are favoring a consecutive 75 basis point (bps) interest rate hike by the Fed.

No doubt, the investing community has not found a meaningful indicator, which could claim the price pressures are finding exhaustion, however, the slowdown signals have soared as Friday’s PMI remained downbeat and big boys' earnings on Wall Street are not tempting for investors.

On the loonie front, the Canadian dollar remained vulnerable after the release of Canada’s Consumer Price Index (CPI). The overall inflation landed at 8.1%, lower than the estimates of 8.4% but remained higher than the prior release of 7.7%. Also, the core CPI landed at 6.20%, 10 bps higher than the prior release of 6.10%.