• A combination of factors prompts fresh selling around USD/CAD on Wednesday.
• Rising oil prices underpin the loonie and exert pressure amid a modest USD slide.
• The downside seems cushioned as investors keenly await the key FOMC decision.

The USD/CAD pair struggles to capitalize on the previous day's solid recovery of around 140 pips from the 1.3530 area and meets with a fresh supply on Wednesday. The intraday downtick drags spot prices back below the 1.3600 mark and is sponsored by a combination of factors.

 Crude oil prices edge higher for the second successive day in the wake of the overnight data showing an unexpected drop in US crude inventories, which, in turn, underpins the commodity-linked loonie. This, along with the emergence of fresh US dollar selling, is seen exerting downward pressure on the USD/CAD pair.

Speculations that the Fed will soften its hawkish stance amid signs of a slowdown in the US economy keep the USD bulls on the defensive. The downside, however, remains cushioned, at least for the time being, as traders might refrain from placing fresh directional bets and prefer to wait for the outcome of a two-day FOMC meeting.

The Fed is scheduled to announce its policy decision later during the US session and is expected to hike interest rates by 75 bps rate hike for the fourth time in as many meetings. Investors, meanwhile, will focus on the accompanying policy statement and the post-meeting press conference for clues about the future rate hike path.

This, in turn, will play a key role in influencing the USD price dynamics and help determine the next leg of a directional move for the USD/CAD pair. In the meantime, the US ADP report on private-sector employment might do little to provide any impetus, warranting some caution before positioning for any further intraday losses.

Technical levels to watch