On most FED Interest Rate Announcement days, forex action is modest. Today has been a different story as several of the majors are trending ahead of the 2:00 PM EST FED engagement. Among the most active pairs has been the USD/CAD. Since the EIA Crude Oil Stocks Report became public earlier in the session, the Greenback has put on a show versus the Loonie.

EIA Reports Massive Supply Build

The weekly crude oil inventories cycle is complete and supplies are on the rise. Fall seasonality is in full effect, as shown by this week’s supply stats:

Event                                     Actual       Projected     Previous

API Crude Oil Stocks            0.592M            NA             4.450M

EIA Crude Oil Stocks            5.702M         0.494M       -1.699M

Both the API and EIA figures each showed a build in supplies-on-hand but in very different ways. While the API number was technically positive, it did show an almost 4 million barrel decrease from last Tuesday. On the other hand, the EIA report came in extremely positive at 5.702 million barrels. At this point, the EIA report is winning the day ― WTI crude oil is off more than 1% per barrel and the USD/CAD is on the bull.

An Active Day For The USD/CAD

Bullish sentiment has been the story of the day for the USD/CAD. Rates have jumped by more than 90 pips, with most of the action following this morning’s Bank of Canada (BoC) statements and EIA Crude Oil Stocks Report.

Going into today’s FED meeting, there are a few support and resistance levels worth noting:

• Resistance(1): Bollinger MP, 1.3198
• Resistance(2): 62% Retracement, 1.3229
• Support(1): Daily SMA, 1.3125

Bottom Line: Fundamentals have been key for the USD/CAD throughout today’s session. GDP came in better than expected, oil supplies are up, and the BoC’s economic projections are ominous; all of these factors have contributed to the bullish break in the USD/CAD.

Although we are likely on the verge of more FED rate cuts, the USD/CAD is gaining ground. Projected fading oil demand and a dovish BoC are two primary reasons why. If the strength continues, a late-day Fibonacci short may set up.

For the rest of the session, I will have sell orders in the queue from 1.3229. With an initial stop at 1.3257, this trade produces 25 pips on a slightly sub-1:1 risk vs reward management plan.