• USD/CAD remains depressed through the early North American session amid softer USD.
• An intraday pullback in oil prices undermines the loonie and helps limit any further losses.
• Investors also prefer to move to the sidelines ahead of the crucial FOMC policy decision.

The USD/CAD pair fades an early North American session spike to the 1.3630 area and retreats to the lower end of its daily range in the last hour. The pair is currently trading around the 1.3600 mark amid a modest US dollar weakness, though the downside remains cushioned ahead of the key central bank event risk.

The Fed is scheduled to announce its monetary policy decision later this Wednesday and is anticipated to hike interest rates by 75 bps for the fourth time in a row. In the meantime, speculations that the US central bank will soften its hawkish stance, amid signs of a slowdown in the US economy, continue to weigh on the USD and act as a headwind for the USD/CAD pair.

The USD bulls remain on the defensive and fail to gain any respite from the upbeat ADP report, which showed that the US private-sector employers added 239K jobs in October against the 193K expected. That said, an intraday pullback in crude oil prices undermines the commodity-linked loonie and turns out to be a key factor offering some support to the major, at least for now.

Investors remain worried that a deeper global economic downturn will dent fuel demand. This, along with a fresh COVID-19 outbreak in China, fails to assist crude oil prices to find acceptance above the $89.00/barrel mark. In fact, China's National Health Commission (NHC) reaffirms that the country will stick to its stringent zero-COVID policy to control epidemics.

Traders also seem to prefer to wait for the outcome of a two-day FOMC monetary policy meeting. The accompanying monetary policy statement and Fed Chair Jerome Powell's comments at the post-meeting press conference will be closely scrutinized for clues about the future rate-hike path, which will influence the USD and provide a fresh directional impetus to the USD/CAD pair.

Technical levels to watch