USD/CAD advances beyond 1.3280 as WTI edges lower after EIA report

• EIA reports an increase of 1.1 million barrels in US crude oil stocks.
• WTI continues to fall toward the $58 handle.
• US Dollar Index remains stuck in daily range as focus shifts to FOMC.

The USD/CAD pair dropped to 1.3240 area in the early trading hours of the American session but didn't have a difficult time reversing its direction. As of writing, the pair was up 0.29% on the day at 1.3282.

Falling crude oil prices seem to be weighing on the commodity-sensitive and driving the pair higher on Wednesday. The weekly report published by the Energy Information Administration today revealed that crude oil stocks in the US increased by 1.1 million barrels and put additional bearish pressure on oil prices. As of writing, the barrel of West Texas Intermediate was down 0.65% on the day at $58.35.

Inflation in Canada softens

Earlier today, the data published by Statistics Canada revealed that annual inflation, as measured by the Consumer Price Index (CPI), edged lower to 1.9% and missed the market expectation of 2%. Although the reading was not too far off of analysts' estimate, it seems to be hurting the demand for the Loonie as it could be seen as a factor that would cause the Bank of Canada to hold the policy rate unchanged for longer than expected. 

At 18:00 GMT today, the Federal Reserve will be announcing its policy decision and release the updated economic projections. Later at 18:30 GMT, the Federal Open Market Committee Chairman, Jerome Powell, will be delivering his remarks on the monetary policy outlook in a press conference.

Previewing the event, Deutsche Bank analysts said that they were expecting another 25 basis points rate cut. “The main focus will be on where they go after this week," analysts added.

"Our economists think a continued dovish bias should be evident in the statement language, Summary of Economic Projections and Chair Powell’s press conference. It seems Powell is still keen to emphasise the baseline as a mid-cycle slowdown though over anything more sinister but it’s hard to imagine him not highlighting the risks, especially around trade.”

FOMC Preview: What 13 major banks are expecting from September meeting?

Technical levels to watch for