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USD/CAD firming as investors await US CPI cues

CPI later Wednesday and PPI Thursday are expected to shape expectations for the Fed, which in turn could affect near term USD demand and the direction of USD/CAD.

Reported · Written up by our desk · Major Pairs

The USD/CAD pair edged higher in the Asian session on Wednesday, recovering from a three day decline that had pushed spot prices to around 1.3915, with the pair trading near 1.3930. FXStreet said the move lacks strong conviction as traders look ahead to the release of US inflation data for fresh guidance.

The US Consumer Price Index, due later on Wednesday, and the Producer Price Index on Thursday are expected to provide cues on the Fed’s future policy path, which can influence near term USD demand. FXStreet also noted that markets are positioning cautiously ahead of those releases.

FXStreet linked support for USD/CAD to a mix of forces, including commodity and risk dynamics. It said crude oil jumped to a one and a half week high after an Iran official said the Strait of Hormuz would not open until the US meets Tehran’s demands, while attacks by Iran backed Houthi rebels on vessels in the Red Sea and the Bab el-Mandeb Strait were described as adding war risk premiums that can benefit oil linked currencies like the Canadian dollar.

FXStreet added that traders are pricing in over a 75% chance of a Fed rate hike by the end of the year, using CME Group’s FedWatch tool, and said geopolitical uncertainties also lend some support to the US dollar. The outlet cited technical levels, including the 100 day SMA near 1.3919, with weakness below that area potentially exposing lower Fibonacci supports.

Latest closeWTI crude $83.42 ▲1.6%

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