USD/CAD declines towards 1.3150 as Fed delivers less-hawkish guidance

• USD/CAD has gauged a temporary cushion, however, the downside bias is still solid.
• For September’s monetary policy, Fed policymakers decided to remain dependent on incoming data.
• Upbeat oil prices infuse strength in the Canadian Dollar.

The USD/CAD pair found intermediate support after correcting swiftly to near 1.3160 in the London session. The Loonie asset is expected to continue its downside move as the US Dollar Index (DXY) is under pressure after less-hawkish interest rate guidance delivered by the Federal Reserve (Fed) on Wednesday.

S&P500 futures have posted significant gains in Europe, portraying an increase in the risk appetite of the market participants. US equities remained choppy on Wednesday after the Fed raised interest rates by 25 basis points (bps) to 5.25-5.50%. An interest rate hike of 25 bps was already expected by the market participants.

For September’s monetary policy, Fed policymakers decided to remain dependent on incoming data. The market mood turned upbeat after Fed Chair Jerome Powell conveyed that policymakers are not expecting a recession amid a tight labor market.

Action in the US Dollar Index is expected to continue ahead of the release of the second quarter Gross Domestic Product (GDP) numbers and June’s Durable Goods Orders data. As per the preliminary report, GDP and Durable Goods Orders were expanded at a pace of 1.8% and 1.0% respectively.

Meanwhile, the Canadian Dollar looks solid against the US Dollar due to upbeat oil prices. West Texas Intermediate (WTI) oil futures are gathering strength to climb above the crucial resistance of $80.00 as investors hope that July’s interest rate hike by the Fed is the last nail in the coffin. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices support the Canadian Dollar.