• USD/CAD drifts lower for the second straight day and drops to a two-week low on Wednesday.
• Bullish Oil prices underpin the Loonie and exert pressure amid the prevalent USD selling bias.
• Trades now look to the key US CPI report and the BoC decision for a fresh directional impetus.

The USD/CAD pair remains under some selling pressure for the second successive day on Wednesday and extends its rejection slide from the 50-day Simple Moving Average (SMA), around the 1.3385 region, or a one-month high touched last week. The downward trajectory - also marking the third day of a negative move in the previous four - drags spot prices to a two-week low, around the 1.3200 mark during the Asian session and is sponsored by a combination of factors.

Crude Oil prices build on the overnight breakout momentum through the 100-day SMA and jump to the highest level since early May, bolstered by supply cuts announced by the world's biggest oil exporters - Saudi Arabia and Russia. This, in turn, continues to underpin the commodity-linked Loonie, which, along with sustained US Dollar (USD) selling, further contributes to the offered tone surrounding the USD/CAD pair. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, sinks to a fresh two-month low in the wake of speculations that the Federal Reserve (Fed) is nearing the end of its current rate-hiking cycle.

Investors seem convinced that the US central bank has limited headroom to continue tightening the monetary policy, especially after the New York Fed's monthly survey revealed on Monday that the one-year consumer inflation expectation dropped to the lowest level since April 2021. Hence, the market focus will remain glued to the release of the latest US consumer inflation figures, due later during the early North American session. The crucial US CPI report is likely to influence expectations about the Fed's future rate-hike path, which, in turn, will drive the USD demand in the near term and provide some meaningful impetus to the USD/CAD pair.

Apart from this, market participants on Wednesday will take cues from the Bank of Canada (BoC) monetary policy decision. The Canadian central bank is expected to hike interest rates by 25 bps following strong indicators from the domestic CPI report and June's significant job growth. Investors will further scrutinize BoC Governor Tiff Macklem's remarks at the post-meeting press conference, which should infuse some volatility around the Canadian Dollar (USD) and help determine the near-term trajectory for the USD/CAD pair.

Technical levels to watch