- USD/CAD trades nearly flat at 1.3552, as high oil prices offset minor gains in the US Dollar Index (DXY).
- US CPI data due Wednesday could be pivotal; expected at 3.6% YoY, up from July’s 3.2%, with core CPI at 4.3%.”
- Bank of Canada remains cautious; October meeting could see rates held at 5% as mixed economic data looms.
The Canadian Dollar (CAD) dropped on Tuesday’s session against the US Dollar (USD), underpinned by high oil prices, amid the lack of catalyst in the financial markets. With traders bracing for the August US inflation report, we could expect the USD/CAD to trade within a choppy trading range. The USD/CAD is trading at 1.3552, almost unchanged.
Loonie holds steady vs. the US Dollar, ahead of US CPI report for August
On Wednesday, the US Bureau of Labor Statistics (BLS) will reveal the US Consumer Price Index (CPI) report, which is expected to climb above the prior month’s figure. The CPI is estimated at 3.6% YoY, above July’s 3.2%. Excluding volatile items, the so-called core CPI is foreseen at 4.3% YoY, down from July 4.7%.
Even though the Greenback recovered some ground against a basket of six currencies, the US Dollar Index (DXY) finished with minuscule gains of 0.01%, at 104.54. In addition, it failed to bolster the USD/CAD pair, as oil prices finished with gains of more than 1.70%.
Up north across the US border, Canada’s economy has shown mixed data. Although the second quarter Gross Domestic Product (GDP) sounded the alarms of a recession, the latest employment report suggests the economy remains robust.
That triggered a reaction by the Bank of Canada (BoC), who decided to sit on their hands, awaiting more data, before committing to keep rates on hold or opening the door for additional tightening. Interest rate probabilities show the BoC is expected to hold rates at 5% for the upcoming meeting in October 25.
Nevertheless, Tiff Macklem, the BoC’s Governor, stressed that interest rates may not be high enough to tame inflation. He added, “Going forward, we will look for further evidence that price pressures are easing.”
Given the backdrop, if US inflation decelerates in both readings, USD/CAD traders could expect further downside, with sellers eyeing a test of the 200-DMA. Otherwise, speculations the US Federal Reserve would continue to tighten monetary conditions could pave the way for buyers to reclaim 1.3600.
USD/CAD Price Analysis: Technical outlook
After extending its losses for three straight days, the USD/CAD has fallen from around 1.3600 towards the 1.3550s area, closing near the day’s lows. Therefore, the USD/CAD path of least resistance is downwards and will face first support at the current week’s low of 1.3543. Once cleared, the pair could dive to the 1.3500 figure, followed by the 200-day Moving Average (DMA( at 1.3464. On the flip side, the USD/CAD could shift upwards if the pair stages a comeback toward the September 11 high at 1.3593.
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
AUD/USD holds below the 0.6400 mark ahead of the Australian CPI
The AUD/USD pair remains under selling pressure and drops below 0.6400 during the early Asian session on Wednesday. The pair is weighed by the negative sentiment and a decline in commodity prices. The pair trades around 0.6394, losing 0.03% on the day.
EUR/USD hits fresh six-month lows near 1.0550
EUR/USD is holding lower ground near 1.0550, sitting at fresh six-month lows in the Asian session on Wednesday. The US Dollar remains firm, benefiting from risk aversion, maintaining the downward pressure on the pair.
Gold remains on the defensive near $1,900 amid the USD demand
Gold price attracts some sellers around $1,902 during the early European session on Wednesday. Precious Metal faces some selling pressure due to a rally of the US Dollar (USD) ahead of the highly-anticipated inflation data on Friday.
Ripple and Coinbase lead the big fight as US crypto firms advocate for regulatory overhaul
Ripple Labs is standing shoulder-to-shoulder with US-based cryptocurrency exchange Coinbase as crypto firms in the US push for a regulatory overhaul in the country. It comes amid growing concerns that stringent and unclear regulatory structures in the US continue to drive business away from the country.
Australia Monthly CPI Preview: Inflation expected to rebound in August
The Australian Monthly Consumer Price Index (CPI) inflation data for August will be published by the Australian Bureau of Statistics (ABS) on Wednesday at 01:30 GMT. The data could be critical for the Australian Dollar (AUD) and the Reserve Bank of Australia (RBA).