USD/CAD steadies above the key 1.25 level, FOMC decision eyed

The greenback recovered a bit against its Canadian counterpart, helping the USD/CAD pair to move away from nearly 15-month lows touched in the previous session. 

Currently trading around the 1.2520-25 region, the pair ignored a subdued US Dollar action and inched higher as investors seemed to lighten their positions heading into the key event risk - FOMC decision. Markets even shrugged off a strong rally in crude oil prices, which tends to boost demand for the commodity-linked currency - Loonie, with pre-Fed repositioning trade driving the pair higher through early NA session. 

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It is worth noticing that despite the recent bearish breakdown, the pair has been finding some support near the 1.2480 area. Moreover, reemergence of buying interest at lower levels, and the pair's resilience to give up the key 1.25 psychological mark could now be seen as first indications of near-term bottom formation. 

The pair, however, still remains vulnerable to break lower in case of renewed USD selling bias on any surprise dovish signals from today's FOMC meeting. Hence, focus would remain on the accompanying rate statement, where details about the Fed's plan to start with its balance sheet normalization policy would help determine the next leg of directional move for the major.

   •  USD/CAD Forecast

Technical levels to watch

On a sustained recovery above 1.2540 level, a bout of short-covering could lift the pair towards reclaiming the 1.2600 handle en-route its next major hurdle near 1.2645-50 region. Alternatively, a decisive break below the 1.25 handle is likely to accelerate the slide towards May 2016 lows support near 1.2460 area ahead of the 1.2400 round figure mark.