- A combination of factors dragged USD/CAD lower for the second successive day.
- Rising oil prices underpinned the loonie and acted as a headwind for the major.
- Softer US CPI report weighed on the USD and contributed to the intraday selling.
The USD/CAD pair witnessed some selling during the early North American session and dropped to the 1.2600 neighbourhood, or two-day lows in reaction to the softer-than-expected US CPI report.
Following a brief consolidation through the first half of the trading action on Tuesday, the USD/CAD pair met with some fresh supply and turned lower for the second successive day. WTI crude oil shot to the highest level since August 3 – closer to the $71.00/barrel mark – and underpinned the commodity-linked loonie.
On the other hand, the US dollar extended the previous day's retracement slide and dropped to one-week lows following the release of the US consumer inflation figures. The headline CPI missed expectations and decelerated to 0.3% in August from 0.5% in the previous month. On yearly basis, the CPI edged lower to 5.3%, as anticipated.
Meanwhile, core inflation, which excludes food and energy prices, fell short of consensus estimates and recorded a modest 0.1% rise during the reported month. More importantly, the yearly core CPI fell to 4% from 4.3% in July and dashed hopes for an imminent Fed taper announcement at the upcoming policy meeting on September 20-21.
This was evident from a modest intraday pullback in the US Treasury bond yields. Apart from this, the underlying bullish sentiment in the financial markets might further act as a headwind for the safe-haven greenback. The fundamental backdrop favours bearish traders and supports prospects for further downside for the USD/CAD pair.
However, hopes that the Fed would eventually begin rolling back its massive pandemic-era stimulus later this year could lend some support to the greenback. This makes it prudent to wait for some follow-through selling below last Friday's swing lows, around the 1.2585-80 region, before placing aggressive bearish bets.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.