- USD/CAD seesaws around seven-week high as bulls await more clues.
- Broad US Dollar strength superseded Oil price recovery as bulls kept the reins in the last two consecutive weeks.
- Strong US data underpin hawkish Fed bets and propel Loonie pair buyers.
- US ISM PMIs, Canada Q4 GDP eyed for clear directions.
USD/CAD buyers flirt with the 1.3600 threshold during Monday’s sluggish Asian session, following a two-week uptrend to the highest levels since early January. The Loonie pair’s latest gains seem to take more clues from the upbeat US Dollar than prices of Canada’s key export, namely the WTI crude oil. However, the cautious mood ahead of the key Canadian data appears to be probing the pair buyers of late.
That said, the US Dollar Index (DXY) marked a four-week uptrend by the end of Friday, grinding near the highest levels in seven weeks of late, on robust United States data, especially concerning inflation, underpinned hawkish Federal Reserve concerns.
On Friday, the Personal Consumption Expenditures (PCE) Price Index rose to 5.4% YoY versus 5.3% prior and 4.9% market forecasts. Further, the more relevant Core PCE Price Index, known as Fed’s favorite inflation gauge, rose to 4.7% YoY, compared to 4.6% prior and analysts' forecast of 4.3%.
While tracing upbeat US data, the Federal Reserve (Fed) officials were also hawkish and backed the US Dollar bulls and USD/CAD pair buyers.
Cleveland Fed President Loretta Mester told CNBC on Friday that his funds' rate was above the median in December and still thinks they need to be somewhat above 5%. The policymaker also added that inflation risks still tilted to the upside. On the same line, Federal Reserve Bank of Boston President Susan Collins said, “More rate hikes needed to deal with 'too high' inflation.” Furthermore, Governor Philip Jefferson said, “Wage growth in the US is running too high to be consistent with a timely and sustainable return to the Federal Reserve's 2% inflation objective.”
Also highlighting the US inflation woes was US Treasury Secretary Janet Yellen, who spoke on the sideline of the Group of 20 (G20) meetings on Friday. “Inflation is coming down if you measure it on a 12-month basis, but still core inflation, which I think will fall further, remains higher than is consistent with 2%,” said the diplomat.
On the other hand, WTI crude oil seesaw around $76.50 after bouncing off a three-week low in the last two consecutive days. It’s worth noting that the odds of higher energy demand due to easing recession fears favor Oil prices.
Amid these plays, Wall Street closed in the red while the US two-year Treasury bond yields rose to the highest levels since early November 2022.
Moving on, US ISM Manufacturing and Services PMI and Canada’s fourth quarter (Q4) Gross Domestic Product (GDP) will be important for the USD/CAD traders to watch for clear directions. That said, inflation concerns and the Fed talks appear to have more capacity to propel USD/CAD than the Canadian data unless being extremely different from market forecasts.
Technical analysis
A daily closing beyond a downward-sloping trend line from November 2022, now immediate support around 1.3560, directs the USD/CAD bulls towards the last December’s peak surrounding 1.3700.
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 breaks below 1.1000 on stellar NFP
The buying bias in the Greenback gathers extra pace on Friday after the US economy created far more jobs than initially estimated in September, dragging EUR/USD to the area of new lows near 1.0950.
GBP/USD breaches 1.3100 after encouraging US Payrolls
The continuation of the uptrend in the US Dollar motivates GBP/USD to accelerates its losses and breaches 1.3100 the figure in the wake of the release of US NFP.
Gold rebounds from daily lows and flirts with $2,670
Following a post-NFP dip to the $2,640 region, Gold prices now embarks on an acceptable rebound and retest the area of $2,670 per ounce troy despite the marked advance in the US Dollar and rising US yields across the board.
US Payrolls surge in September, as 50bp rate cut ruled out
US payrolls data surprised on the upside in September, rising by 254k, smashing expectations of a 150k rise. The unemployment rate fell to 4.1% from 4.2%, average hourly earnings increased to a 4% YoY rate and there was a 72k upwards revision to the previous two months’ payrolls numbers.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.