USD/CAD remains choppy below 200-DMA ahead of Canadian CPI, Fed

• USD/CAD returns to the red below 1.2600 despite DXY rebound.
• Firmer WTI prices weigh on the spot amid risk recovery.  
• 200-DMA continues to cap the upside ahead key event risks.

USD/CAD is extending its choppy trading into the European session, having failed to find acceptance above 1.2600 heading into the Canadian CPI and Fed monetary policy decision.

The major remains pressured despite the rebound in the US dollar alongside the Treasury yields, as a recovery in the risk appetite amid strong European earnings reports diminishes the safe-haven appeal of the US bonds.

The downside pressure in the spot could be attributed to higher WTI prices, as expectations of tighter supplies counter covid fears. Further, chart-based selling also appears to be another catalyst behind USD/CAD’s weakness, especially after the 200-Daily Moving Average (DMA) at 1.2603 continues to limit the bullish potential.

Despite the recent leg lower, the currency pair extends its range play between 1.2525-1.2610 levels into the fifth straight session on Wednesday, awaiting a breakout in either direction depending on the Fed outcome.

The Fed is widely expected to maintain its monetary policy settings, although any hints on the taper timing could be a big market mover, impacting the US dollar valuations significantly.

Also, of note remains the Canadian Consumer Price Index (CPI) data, with the Bank of Canada (BOC) core CPI figure expected to ease to 2.4% in June vs. May’s 2.8%.

USD/CAD: Technical levels

“From a technical perspective, the overnight positive move stalled near the very important 200-day SMA. The mentioned barrier is pegged near the 1.2605 region, which should now act as a key pivotal point for short-term traders. A sustained strength beyond will set the stage for additional gains and accelerate the move towards the 1.2665-70 horizontal resistance. On the flip side, the 1.2555-50 region now seems to protect the immediate downside ahead of the 1.2525 horizontal zone,” FXStreet’s Analyst, Haresh Menghani explains.

USD/CAD: Additional levels