|

USD/CAD treads waters around 1.3450, focus on FOMC decision

  • USD/CAD retraces the recent losses ahead of the Fed policy decision.
  • Upbeat Canada’s CPI data reinforces the Canadian Dollar (CAD).
  • Higher Crude prices exert downward pressure on the Loonie pair.

USD/CAD trades higher around 1.3450 during the Asian session on Wednesday, snapping the two-day losing streak. The pair is under pressure after Canada’s upbeat inflation data was released on Tuesday.

Canada's Consumer Price Index (CPI) for the year-over-year period in August increased to a rate of 4.0%, surpassing market expectations of 3.8% and the previous reading of 3.3%. However, the CPI (MoM) rose by 0.4%, slightly lower than the 0.6% reported previously but still exceeding market expectations of 0.2%.

BoC Consumer Price Index Core (YoY) report printed the rate of 3.3%, which exceeds the previous 3.2% rate.

Additionally, the surge in Crude oil prices is bolstering the Canadian Dollar (CAD). The concerns over global supply reduction lead to oil costs higher. WTI price trades around $89.90 at the time of writing.

The Energy Information Agency (EIA) warns that US shale production is expected to decrease further in October. According to the EIA's Drilling Productivity Report, shale production is projected to reach 9.393 million barrels per day (bpd), which is the lowest level since May of this year.

US Dollar Index (DXY) experienced a seesaw during the American session on Tuesday. The deterioration in market sentiment and higher US Treasury yields propelled the DXY to initially drop to 104.80 but then quickly rebounded above the 105.00 level once more.

DXY treads waters above 105.10 at the time of writing, reinforced by higher US Treasury bond yields. The yield on the US 10-year Treasury note stands at 4.36% by the press time, below its highest level in 16 years.

Market sentiment appears to be the US Federal Reserve (Fed) maintaining interest rates within the existing 5.25%-5.50% range in September. This stance could potentially exert pressure on the US Dollar (USD). According to the CME FedWatch Tool, the likelihood of another rate hike during the November and December meetings has been reduced.

However, the Greenback may find support in the ongoing possibility of maintaining higher policy rates over an extended period. This is attributed to the resilience of the US economy, marked by a decrease in inflationary pressures and consistent labor market growth.

According to a Reuters report, US Treasury Secretary Janet Yellen stated on Tuesday that, as the economy is operating at full employment, it's essential for US growth to slow down to a pace that aligns with its potential growth rate in order to bring inflation back to target levels.

Yellen also said "I think the Chinese would most likely use the policy space they have to try to avoid a slowdown with major proportions. There may be spillovers from China’s economic difficulties to the US."

Market participants will also closely focus on the "dot plots" to evaluate the anticipated interest rate path. According to the most recent Summary of Economic Projections (SEP), the median estimate from the Federal Reserve suggests that interest rates could potentially reach a peak of 5.6%.

USD/CAD: additional important levels

Overview
Today last price1.3457
Today Daily Change0.0009
Today Daily Change %0.07
Today daily open1.3448
 
Trends
Daily SMA201.3567
Daily SMA501.3423
Daily SMA1001.3401
Daily SMA2001.3464
 
Levels
Previous Daily High1.349
Previous Daily Low1.3379
Previous Weekly High1.3639
Previous Weekly Low1.3493
Previous Monthly High1.364
Previous Monthly Low1.3184
Daily Fibonacci 38.2%1.3422
Daily Fibonacci 61.8%1.3448
Daily Pivot Point S11.3388
Daily Pivot Point S21.3328
Daily Pivot Point S31.3277
Daily Pivot Point R11.3499
Daily Pivot Point R21.355
Daily Pivot Point R31.361

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

More from Akhtar Faruqui
Share:

Editor's Picks

AUD/USD stays weak above 0.6900 after China’s trade data

AUD/USD struggles to capitalize on the previous day’s recovery and stays defensive on the 0.6900 level following the narrowing of trade surplus in China. Increased December Fed rate hike bets allows the US Dollar to pause its decline and weigh on the pair. US CPI data is next of note for the major.

USD/JPY retakes 158.00 on weak Japanese data; focus shifts to US CPI

USD/JPY attracts some dip-buyers and retakes 158.00 in the Asian session on Tuesday as a fall in Japan’s Household Spending offsets hawkish BoJ Summary of Opinions, undermining the Japanese Yen. Moreover, Fed hike bets support the safe-haven US Dollar and the currency pair. The market focus now shifts to the release of the crucial US CPI report.

Gold flirts with $4,000 on solid USD buying

Gold slips back to the proximity of the key $4,000 mark per troy ounce on Tuesday, reaching new four-day lows at the same time. The yellow metal’s severe retracement follows the firm performance of the US Dollar, rising US Treasury yields across the curve and reignited speculation of extra Fed tightening.

Pi Network rebounds from record lows, exits oversold territory as momentum improves

Pi Network (PI) shows a strong recovery on Tuesday, up over 7% after recording its all-time low of $0.0624 the previous day. PI token’s appeal in the derivatives market shows minor improvement, with Open Interest rising to $6.21 million.

Five risks for the global economy in 2027

From AI bubbles to geopolitical breakthroughs, these are some of the five ways why this outlook could go wrong – or right: A severe correction in US stocks triggered by an AI meltdown, second-round inflation effects emerge at scale or geopolitical de-escalation delivers an energy peace dividend.


Gold reclaimed $4,100. Tuesday’s CPI test decides if it holds
Gold (XAU/USD) starts the week on a positive note, reclaiming the $4,100 psychological level as the US Dollar (USD) retreats from its recent highs. The precious metal recovers from Friday's losses, although investors remain cautious ahead of Tuesday's US Consumer Price Index (CPI) report, which could determine the next direction for Bullion.