- USD/CAD attracts some buyers for the third straight day and climbs to a fresh YTD peak.
- Reduced Fed rate cut bets, along with geopolitical risks, benefit the USD and lend support.
- An uptick in Oil prices underpins the Loonie and keeps a lid on further gains for the major.
The USD/CAD pair builds on last week's breakout momentum through the 1.3600-1.3610 supply zone and gains some positive traction for the fifth successive day on Tuesday. Spot prices climb to the 1.3815 region, or the highest level since November 14 during the Asian session and remain well supported by the underlying strong bullish sentiment surrounding the US Dollar (USD).
The USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs to over a five-month top in the wake of expectations that the Federal Reserve (Fed) will delay cutting interest rates amid sticky inflation. Adding to this, the upbeat US Retail Sales figures released on Monday indicated that strong consumer spending could underpin inflation and force the Fed to keep interest rates higher for longer. The hawkish outlook, meanwhile, remains supportive of elevated US Treasury bond yields, which is seen acting as a tailwind for the buck.
Apart from this, a generally weaker tone around the equity markets, amid persistent geopolitical tensions, turns out to be another factor benefitting the safe-haven Greenback and lending support to the USD/CAD pair. Meanwhile, Israel's military chief said that his country would respond to Iran's weekend missile and drone attack, raising the risk of a further escalation of conflicts in the Middle East. This assists Crude Oil prices to build on the overnight bounce from a two-week low, which could underpin the commodity-linked Loonie and cap the major.
Market participants now look to the release of the Canadian consumer inflation figures, due later during the early North American session. Meanwhile, the US economic docket features the release of housing market data and Industrial Production figures. Apart from this, speeches by influential FOMC, including Fed Chair Jerome Powell, and the broader risk sentiment will drive the USD demand. This, along with Oil price dynamics, should provide some meaningful impetus to the USD/CAD pair and allow traders to grab short-term opportunities.
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 retargets the 0.6600 barrier and above
AUD/USD extended its positive streak for the sixth session in a row at the beginning of the week, managing to retest the transitory 100-day SMA near 0.6580 on the back of the solid performance of the commodity complex.
EUR/USD keeps the bullish bias above 1.0700
EUR/USD rapidly set aside Friday’s decline and regained strong upside traction in response to the marked retracement in the Greenback following the still-unconfirmed FX intervention by the Japanese MoF.
Gold advances for a third consecutive day
Gold fluctuates in a relatively tight channel above $2,330 on Monday. The benchmark 10-year US Treasury bond yield corrects lower and helps XAU/USD limit its losses ahead of this week's key Fed policy meeting.
Bitcoin price dips to $62K range despite growing international BTC validation via spot ETFs
Bitcoin (BTC) price closed down for four weeks in a row, based on the weekly chart, and could be on track for another red candle this week. The last time it did this was in the middle of the bear market when it fell by 42% within a span of nine weeks.
Japan intervention: Will it work?
Dear Japan Intervenes in the Yen for the first time since November 2022 Will it work? Have we seen a top in USDJPY? Let's go through the charts.