USD/CAD climbs to fresh daily highs near 1.3100

USD/CAD dropped to its lowest level in over two weeks near 1.2950 on Tuesday but reversed its direction in the early American session. Fueled by the renewed dollar strength, USD/CAD rose sharply toward 1.3100 before starting to consolidate its daily gains. As of writing, the pair was up 0.6% on the day at 1.3070.

The data published by the US Bureau of Labor Statistics revealed on Tuesday that annual inflation in the US, as measured by the Consumer Price Index (CPI), edged lower to 8.3% in August from 8.5% in July. More importantly, the Core CPI, which excludes volatile food and energy prices, jumped to 6.3% from 5.9%, surpassing the market expectation of 6.1%. Following this report, the US Dollar Index erased its weekly losses in a matter of minutes and climbed above 109.00.

Meanwhile, crude oil prices stay relatively calm and allow the dollar's valuation to drive the pair's action. The barrel of West Texas Intermediate (WTI) was last seen trading virtually unchanged on the day at $88.15.

Following the hot US inflation report, Wall Street's three main indexes are down between 1.7% and 3%, allowing the dollar to preserve its strength in the second half of the day.

There won't be any high-impact data releases in the remainder of the day and the risk perception could drive the pair's action.

Technical levels to watch for