USD/CAD moves away from two-week low set on Tuesday, retakes 1.4300 ahead of Fed

• USD/CAD attracts buyers for the second straight day, though the upside seems limited.
• A modest USD bounce from a multi-month low is seen lending some support to the pair.
• Any meaningful USD upside, however, seems elusive ahead of the crucial FOMC decision. 

The USD/CAD pair is seen building on the overnight bounce from the 1.4260 area, or a nearly two-week low, and gaining some follow-through positive traction for the second straight day on Wednesday. Spot prices climb back above the 1.4300 mark during the Asian session, though the upside seems limited as traders might opt to wait for the outcome of the highly-anticipated FOMC policy meeting.

Market consensus strongly suggests that the Federal Reserve (Fed) will keep the federal funds rate unchanged at the current range of 4.25% to 4.50%. Hence, the focus will be on updated economic projections and the post-meeting press conference, where comments by Fed Chair Jerome Powell will be scrutinized for cues about the future rate-cut path. This, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide some meaningful impetus to the USD/CAD pair.

Heading into the key central bank event risk, some repositioning trade assists the USD to recover slightly from its lowest level since October touched on Tuesday. Apart from this, subdued Crude Oil prices, following the previous day's late pullback from over a two-week high, undermine the commodity-linked Loonie and support the USD/CAD pair. However, the risk of a further escalation of tensions in the Middle East, which could impact supply, helps limit the downside for the black liquid.

Furthermore, a surprise jump in Canada's annual inflation rate, to  2.6% in February or the highest in eight months, might hold back traders from placing aggressive bearish bets around the Canadian Dollar (CAD) and cap the USD/CAD pair. However, the fact that spot prices are holding comfortably above the 100-day Simple Moving Average (SMA) warrants some caution before positioning for an extension of the pair's recent downfall witnessed over the past week or so.