- USD/CAD gained some positive traction on Monday amid a modest pickup in the USD demand.
- Bullish crude oil prices might underpin the loonie and keep a lid on any further gains for the pair.
- Investors might also refrain from placing aggressive bets ahead of the key FOMC policy decision.
The USD/CAD pair edged higher through the early European session and climbed to a four-day high, around the 1.2745 region in the last hour.
Having defended the 1.2700 mark, the USD/CAD pair caught some bids on the first day of a new week and is now looking to build on last week's post-BoC recovery from the vicinity of the 1.2600 mark. The uptick was exclusively sponsored by a pickup in demand for the US dollar and seemed unaffected by an uptick in crude oil prices, which tend to underpin the commodity-linked loonie.
The USD was back in demand amid firming expectations that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation. The speculations were reinforced after data released on Friday showed that the headline US CPI accelerated to the highest level since 1982 in November. Adding to this, the core CPI recorded the sharpest rise since mid-1991.
Meanwhile, easing concerns that the Omicron coronavirus variant would have a limited impact on the global fuel demand acted as a tailwind for oil prices. Apart from this, the prevalent risk-on mood could undermine the safe-haven greenback and cap the upside for the USD/CAD pair. This warrants some caution for aggressive bullish traders and positioning for any further gains.
Investors might also be reluctant, rather prefer to wait on the sidelines ahead of this week's key event risk – the highly-anticipated FOMC monetary policy decision on Wednesday. Given that the markets have been pricing in the possibility for an eventual liftoff in May 2022, the outcome will influence the USD demand and provide a fresh directional impetus to the USD/CAD pair.
In the meantime, the broader market risk sentiment will drive the safe-haven greenback. Apart from this, traders will further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair amid absent relevant market moving economic releases.
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 stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.