USD/CAD looks to close below 1.3150 on oil rally, dovish Fed

• Fed says that it will stay patient on further rate hikes.
• US Dollar Index falls sharply on the dovish shift in the language.
• WTI settles above $54 on Wednesday.

The USD/CAD pair extended its daily slide and slumped to its lowest level since early November at 1.3118 before recovering modestly toward the end of the NA session. As of writing, the pair was down more than 100 pips on the day at 1.3146.

Although the greenback started to gather strength on the back of the upbeat ADP private sector employment report earlier in the session, the currency came under heavy selling pressure as the FOMC adopted a dovish tone in its policy statement and Chairman Powell confirmed the cautious stance. Commenting on today's FOMC event, "The reaction to the Fed decision usually lasts beyond the first hours. As analysts pore into the data and as their analysis pieces pour out, further responses could follow. There is no "hawkish silver lining" here," said FXStreet analyst Yohay Elam.

• Fed Quick Analysis: 5 Dollar downers in the Fed decision, and why the sell-off may continue.
• US: ADP - Private sector employment increased by 213K in January vs 175K expected.

Meanwhile, the commodity-sensitive loonie took advantage of the rising crude oil prices on Wednesday and outperformed its rivals. With today's EIA report from the U.S. showing a smaller-than-expected increase in crude oil stocks, the barrel of West Texas Intermediate rose to its highest level in more than two months before settling 1.73% higher at $54.23.

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