USD/CAD hangs near multi-week lows, below mid-1.3300s

The USD/CAD pair edged lower through the early European session and was last seen hovering near the lower end of its daily range, just below mid-1.3300s.

The pair failed to capitalize on the previous day's attempted recovery move, instead met with some fresh supply on Wednesday and has now drifted back closer to 1-1/2-month lows. The downtick was sponsored by a combination of factors – the emergence of some fresh US dollar selling and a modest pickup in crude oil prices.

The impasse over the next round of the US fiscal rescue package comes amid growing worries about the US economy. Investors remain worried that the second wave of the coronavirus infections could undermine the US economic recovery. This coupled with dovish Fed expectations kept exerting some pressure on the greenback.

The US central bank is scheduled to announce its monetary policy decision later during the US session on Wednesday and is widely expected to keep the policy measures unchanged at the end of a two-day meeting. Hence, the key focus will remain on the accompanying statement, where investors will be looking for hints of a potential shift in the policy stance.

Apart from a broad-based USD weakness, the USD/CAD pair was further pressured by an uptick in oil prices, which tend to underpin demand for the commodity-linked currency – the loonie. Oil prices remain well supported by a report by the American Petroleum Institute, which showed that inventories in the unexpectedly fell by 6.8 million barrels last week.

Despite the negative forces, bears might refrain from placing any aggressive bets heading into Wednesday's key event risk. Hence, any subsequent fall is more likely to find some support near June monthly swing lows, around the 1.3315 region.

Technical levels to watch