USD/CAD inter-markets: any downslide might be limited till 1.3200 handle ahead of Fed decision

Having tested the highest level since July 27, the USD/CAD pair now seems to have moved in a consolidation phase and is currently trading near the upper boundary around 1.3230 level.

After finding a balance area around 1.3200 handle, a fresh bout of selling pressure around crude oil prices accompanied with a slide in the US and Canadian 10-years Treasury bond yields have been the key factors contributing to the pair's latest leg of up-move. 

However, the pair has failed to attract follow through buying interest and further upside was capped at multi-week highs on declining expectations of an eventual Fed rate-hike action this week. 

With the Fed scheduled to announce its rate decision on Wednesday, narrowing yield spread is pointing to Fed inaction and hence, a recovery in crude oil prices might lead to a sharp slide back below 1.3200 handle. 

However, the near-term trajectory would be dependent on the subsequent commentary, which if turns out to be hawkish would leave doors open for a December rate-hike and should restrict any further downslide.