USD/CAD barely climbs around 1.2880s ahead of the FOMC

• USD/CAD extends its weekly rally to two-straight days of gains, but it is below July’s 26 high at 1.2901.
• An upbeat market mood put a lid on the USD/CAD rise as Investors prepare for the FOMC’s decision.
• US Durable Good Orders and a narrower Trade Balance, to boost the US Q2 GDP Advance on Thursday.

The USD/CAD is almost flat during Wednesday’s North American session as investors prepare for the Federal Reserve Open Market Committee (FOMC) decision. The US central bank is expected to hike rates by 75 bps, fully reflected by the rise in US 2-year Treasury yield at 3.075%. Even though a tailwind for the Loonie, the Canadian dollar stays firm due to high crude oil prices. At the time of writing, the USD/CAD is trading at 1.2886.

USD/CAD trimmed its losses despite upbeat sentiment, lifted by positive US growth-linked data

Global equities are trading with gains, reflecting an upbeat sentiment. US corporate earnings cheered by investors keep stocks higher, but as the Fed decision time looms, the mood could turn sour as traders prepare for the Fed decision. in the meantime, the greenback is firm, gaining 0.12%, as shown by the US Dollar Index at 107.320.

US economic data revealed that the Q2 Advance GDP figure might save from printing a contractionary reading. The US Commerce Department reported that Durable Good Orders for June rose more than estimations, while the Trade Balance deficit narrowed for the third straight month. It is also worth noting that inventories are keeping pace despite increasing concerns of a recession.

However, not everything was positive, with June’s Pending Home Sales tumbling by 20%, vs. -13.8% YoY, resulting from higher interest rates. Fed officials already expressed that they were expecting the housing market to slow down, as mortgage rates have doubled since the beginning of 2022, as the Fed started its tightening cycle.

On Wednesday, the USD/CAD began trading around the daily highs at 1.2884 but tumbled as oil prices increased. However, as the Fed’s decision time approaches, USD/CAD traders have begun to reduce their exposure and prepare to assess the US central bank decision.

What to watch

The Canadian economic docket is empty. Meanwhile, on the US front, the Fed’s monetary policy decision will be unveiled around 18:00 GMT, followed by Fed Chair Jerome Powell’s press conference. On Thursday, the Q2 Advance GDP will confirm if the US entered a technical recession, though market players expect a jump from Q1 -1.5% figure to 0.5% expansion.

USD/CAD Key Technical Levels