- USD/CAD edged higher on Wednesday, albeit lacked any strong follow-through.
- Sliding US bond yields undermined the loonie and remained supportive of the uptick.
- Dovish Fed expectations continued acting as a headwind for the USD and capped gains.
- Investors now eye the Canadian CPI report for a fresh impetus ahead of the FOMC minutes.
The USD/CAD pair struggled to capitalize on the previous day's goodish rebound from multi-year lows and remained confined in a range above mid-1.2000s through the early European session.
Crude oil prices extended the previous day's corrective slide from over two-month lows and slipped further below the $65.00/barrel mark on Wednesday. This was seen as a key factor that undermined the commodity-linked loonie and extended some support to the USD/CAD pair.
This, to a larger extent, was offset by the prevalent bearish sentiment surrounding the US dollar. This, in turn, held traders from positioning for any meaningful recovery and kept a lid on any meaningful recovery for the USD/CAD pair, at least for the time being.
Given the Fed's stubbornly dovish view that any spike in inflation will be transitory, investors have been scaling back their expectations for an earlier than anticipated lift-off. This continued acting as a headwind for the USD and dragged it to the lowest level since January.
Hence, the key focus will remain on the latest FOMC monetary policy meeting minutes, due later during the US session. Heading into the key event risk, the release of Canadian consumer inflation figures might provide some trading impetus during the early North American session.
From a technical perspective, the pair's inability to register any meaningful recovery suggests that the near-term downtrend might still be far from being over. That said, oversold conditions on short-term charts warrant some caution before placing fresh bearish bets.