• USD/CAD corrects from out of the 1.2900s with the bullish trend still in place. 
• The attention will be turning back to the Fed again. 

At 1.2985, USD/CAD is flat ahead of the Tokyo cash open. The pair has been in the hands of the bulls at the start of the week despite the Bank of Canada last week surprised the market by raising rates 100bp to 2.50% which drove the CAD higher to test 1.29 the figure. 

''The Bank of Canada continues to be the one of most aggressive developed world central bank having raised rates before the Fed, hiked 50bp before the Fed, and started QT before the Federal Reserve,'' analysts at Rabobank said. 

''The Bank is still confident it can engineer a soft landing, and a front-loaded hiking cycle is the best way to achieve that. But, the path to a soft landing has narrowed and the reduction in the growth outlook does imply some pain.''

Meanwhile, speculators’ CAD net long positions edged lower for a second week and the bullish trend remains in place with the analysts at Rabobank saying this will continue to be ''unless 1.285 is broken, on the upside, we still look to 1.3070 as resistance, but a break above there would open up a move to 1.32.''

As for the US dollar, it has lost some shine to trade back below 107 on Monday as per the DXY index which measures the greenback vs. a basket of major currencies. It was trading as high as 109.29 in a fresh bull cycle high last week. 

Fedspeak has pushed back against a 100bp hike from some notable hawks, raising the risk of a near-term short-squeeze on the Gold Price prior to the meeting. The Federal Reserve has moved into the blackout period before the next meeting leaving prior statements from Fed speakers following the last meeting and to date for the market to chew on.

At the June FOMC meeting, Chair Jerome Powell stated that he would need ‘compelling evidence’ that inflation is easing for the Fed to change course, which he defined as ‘a series of falling monthly inflation readings’. Since then, we have heard from Fed's Raphael Bostic who said “everything is in play” while Mester said there was no reason for a smaller hike. Mary Daly, CEO of San Francisco said 75 bp was her “most likely posture.”