USD/CAD slumps below 1.2730 targets 1.2700 ahead of the FOMC

• The market sentiment is upbeat, lifting the commodity-linked currencies like the Canadian dollar.
• WTI is rising for the second day in a row trades at $71.59, weighing on USD/CAD.
• FOMC: Investors expect a layout of the bond tapering process.

Earlier in the Asian session, the USD/CAD was range-bound within the 1.2800-25 range, dampening market sentiment. Nevertheless, good news emerging from China real-estate developer Evergrande related to its yuan bond interest payment increased the appetite for riskier assets. That said, commodity-linked currencies like the aussie, the kiwi, and the loonie are rising against the greenback.

The USD/CAD is sliding during the American session, trading at 1.2728, down 0.74% at the time of writing.

Also weighing on the pair are oil prices. Western Texas Intermediate (WTI) is trading at $71.59 per barrel, up 1%, on the back of worse than expected API Stockpile report, which tumbled 6.108M barrels on the week ended on September 17. Further, the US Energy Information Administration (EIA) revealed on Wednesday that crude oil inventories fell by 3.5M barrels in the same period abovementioned, thus exerting additional pressure on the USD/CAD.

Investors focus turned to the FOMC meeting and Fed’s Chair Powell press conference

Later at 18:00GMT, the Federal Reserve will release its monetary policy statement and the updated Summary of Economic Projections (SEP). According to analysts, the Fed could tweak the monetary policy statement to lay out the ground of the bond tapering process. Furthermore, investors are waiting for dot-plot changes. It is worth noting that if three FOMC members add to the seven expecting a rate hike for 2022, it will alter the prospects of a rate hike from 2023 to the last quarter of 2022.

KEY TECHNICAL LEVELS TO WATCH