USD/CAD unable to sustain the rally, bears back in charge

USD/CAD testing back to the critical support structure on a skittish FX market post the Fed.

OIl and Canadian GDP next in line as drivers for the currency.

At the time of writing, USD/CAD is trading at 1.3338 between a range of 1.3332 and 1.3387 following the market's skittish reaction to a very unclear Federal Reserve, leaning on the dovish side but unable to offer any firm forward guidance.

USD/CAD has seen a couple of round turns in price action in the aftermath of the Federal Reserve announcements. 

• Fed key take-aways

  • FOMC rate decision (lower bound) actual: 0.00% vs 0.00% previous; est. 0.00%.
  • Voted 10-0 for fed funds rate action.
  • Fed committed to using a full range of tools to support the US economy.
  • Path of the economy will depend significantly on course of coronavirus outbreak.
  • The economy picked up in recent months, but still below pre-pandemic levels.
  • Following sharp declines, economic activity and employment have picked up somewhat recent months but remain well below their levels at the beginning of the year.

Overall, USD/CAD remains under pressure.as the DXY looks down into the abyss.

However, USD positioning has been moving further into short territory, which could mean that extremes will correct and will result in a bounce in the dollar.

On the other hand, if CAD’s role as a funding currency were to increase, then its potentially lower for longer, especially f the oil market dynamic improve for the Canadian economy.