USD/CAD faces barricades around 1.3580 as focus shifts to FOMC minutes

• USD/CAD has sensed selling pressure after failing to surpass the 1.3580 resistance.
• Risk-sensitive currencies are gaining traction as investors are expecting a weak move by the USD Index.
• The release of the FOMC minutes and Canadian employment data will remain in the spotlight.

The USD/CAD pair is displaying some volatile moves in the early Tokyo session after failing to overstep the immediate resistance of 1.3580. The Loonie asset is attracting offers led by improving investors’ risk appetite and an expansion in the oil price.

Risk-sensitive currencies are gaining traction as investors are expecting a carry-forward of weak performance by the US Dollar Index ahead. The USD Index witnessed a steep fall on Friday after surrendering the crucial support of 103.50. Meanwhile, S&P500 futures have initiated action on a positive note, which indicates that the risk profile is getting cheerful.

This week, the release of the Federal Open Market Committee (FOMC) will hog the limelight. The FOMC minutes will provide the rationale behind hiking interest rates by 50 basis points (bps) in December’s monetary policy by the Federal Reserve (Fed).

Previewing this week's upcoming events from the US, TD Securities analysts said that they expect the minutes of the FOMC's December policy meeting shed additional light on the Fed's policy outlook for 2023. Analysts at TD securities are of the view that the terminal rate will reach a range of 5.25-5.50% by the May FOMC meeting.

On the Loonie front, investors will focus on the release of the Canadian employment data, which will release on Friday. Analysts at TD Securities said that they expect employment to rise by 8K in December with the labor market starting to cool down. The Unemployment Rate could trim to 5.2% and the wage range could push higher to 5.5% on an annual basis. An increment in wage growth might keep inflation at elevated levels.

Meanwhile, the oil price has pushed higher to near $80.50 as investors see a peak in Covid-19 cases in China, which will put the economy back on track. It is worth noting that Canada is a leading exporter of oil to the United States and higher oil prices support the Canadian Dollar.