USD/CAD meets resistance near 1.3580 as attention switches to FOMC minutes

After failing to surpass the immediate resistance of 1.3580, the USD/CAD pair is demonstrating some volatility behavior in the early Tokyo session. The Canadian dollar is receiving bids due to an increase in risk appetite among investors and a rise in oil prices.

As investors anticipate that the US Dollar Index will continue to perform poorly in the future, risk-sensitive currencies are gaining traction. The USD Index experienced a sharp decline on Friday after giving up the important support level of 103.50. In the meantime, S&P500 futures have begun trading on a positive note, indicating an improvement in the risk profile.

This week, all eyes will be on the Federal Open Market Committee (FOMC) report. The FOMC minutes will explain why the Federal Reserve raised interest rates by 50 basis points (bps) in December's monetary policy (Fed).

TD Securities analysts anticipate that the minutes of the FOMC's December policy meeting will give additional light on the Fed's policy forecast for 2023 as they preview this week's scheduled US events. By the time of the May FOMC meeting, according to TD securities' analysts, the terminal rate will have reached a range between 5.25 and 5.50 percent.

Friday will see the release of Canadian employment data, which will be closely monitored by investors. TD Securities analysts anticipate an 8,000 increase in employment in December as the job market begins to soften. The unemployment rate might fall to 5.2% and the annual wage range could increase to 5.5%. An increase in wage growth may maintain high levels of inflation.

In the meantime, the price of oil has increased to almost $80.50 per barrel as investors anticipate a decline in Covid-19 cases in China, which will restore economic growth. Notably, Canada is the top oil exporter to the United States, and rising oil prices strengthen the Canadian Dollar.