USD/CAD extends losses to 1.3380 as greenback remains on back-foot

• Broad USD selling ahead of FOMC pleases Loonie bears.
• Comments from BOC’s Poloz and PMI are also in the limelight.

The USD/CAD pair is at the intra-day low of 1.3380 as it extends the previous downturn during initial Wednesday. Market caution ahead of today’s FOMC exerts additional downside pressure on the Loonie pair that has already witnessed heavy declines on Tuesday.

Upbeat industrial production and comments from the Bank of Canada’s (BOC) Governor Stephen Poloz helped the Canadian Dollar (CAD) take better advantage of the US Dollar’s (USD) weakness and ignore sluggish GDP figure from Canada.

The greenback has been on a back-foot since the early day as investors fear of another dovish appearance by the US Federal Reserve. Adding to the pair’s downside could be positive headlines from the US-China trade negotiations that play up the volume for the commodity-linked currencies.

It should also be noted that geopolitical crisis at Venezuela hasn’t been successful in fuelling Crude, Canada’s main export, which in turn could trigger the pair’s U-turn in case of adverse outcome.

While monetary policy meeting by the Federal Open Market Committee (FOMC) is likely to grab the spotlight, Canada’s Markit manufacturing PMI and comments from the BOC’s Governor will also be observed in detail.

Even if the Fed is more likely to reiterate its cautious message, the latest data flow may push Chairman Jerome Powell to turn optimist in his press conference. Elsewhere, Canadian PMI could improve to 51.5 from 50.5 whereas BOC’s Poloz might not risk taking a U-turn from his yesterday’s positive comments on the economic outlook and a statement that the BOC might reverse its rate guidance.

Technical Analysis

50-day and 100-day simple moving average (SMA) near 1.3350/40 could restrict the pair’s near-term declines, a break of which can recall sub-1.3300 area on the chart.

On the upside, 1.3445/50 and 1.3470 seem nearby resistances to overcome in order to aim for 1.3520 number to the north.