USD/CAD stays calm below 1.30 as FOMC fails to revive volatility

The USD/CAD pair showed a limited reaction to the FOMC minutes and fluctuated in a tight 15-pip range. As of writing, the pair is trading at 1.2973, up 0.27% on the day.

Although the US Dollar Index rose to 96.16 in the first 30 minutes following the FOMC statement, it eased back to 96 handle and turned flat on the day. Policymakers didn't paint a clear picture regarding the next move in the normalization process. Some officials saw the medium-term inflation expectations unaffected despite the apparent recent softness in the data; others voiced their concerns over the possibility of a sustained disinflation. Moreover, the minutes didn't reveal a consensus on the timeline of the balance sheet reduction strategy either.

• FOMC Minutes: Policymakers saw recent increase in import prices as consistent with inflation trend in medium term

On the other hand, today's sharp drop in crude oil prices, with the barrel of West Texas Intermediate testing the $45 mark and losing more than 4% on Wednesday, continue to dent the demand for the commodity-sensitive loonie, making it easy for the pair to hold its bullish outlook.

Technical levels to consider

The RSI indicator on the daily graph is still below the 30 handle, suggesting that the pair is likely to continue its upward correction. However, unless the pair is able to make a daily close above 1.3000 (psychological level), it could struggle to extend this move. 1.3015 (10-DMA) aligns as the initial resistance for the pair ahead of 1.3100 (psychological level) and 1.3150 (50-DMA). On the downside, near term supports are located at 1.2930 (daily low), 1.2905 (Sept. 5, 2016, low) and 1.2825 (Sept. 6, 2016, low).