USD/CAD Gains Ground Amid USD Demand and Oil Price Decline

USD/CAD Gains Ground Amid USD Demand and Oil Price Decline

The USD/CAD currency pair is making modest gains during early European trading hours, trading near 1.3516, reflecting a 0.5% increase for the day. The pair's movements are influenced by factors such as the hawkish stance of Federal Reserve (Fed) officials, changes in oil prices, and upcoming economic data releases.

USD Demand and Fed Hawkishness

One of the key drivers behind the USD/CAD's recent gains is the demand for the US Dollar. The hawkish stance of the Federal Reserve (Fed) has contributed to the strength of the greenback. Fed officials have signaled their willingness to raise interest rates, and Minneapolis Federal Reserve Bank President Neel Kashkari even expressed his expectation of one more rate hike this year. The anticipation of higher rates is bolstering the USD's position against the Canadian Dollar (CAD).

Oil Price Decline and Its Impact

Another factor at play is the decline in oil prices. Canada is a major oil exporter to the United States, and fluctuations in oil prices can significantly affect the Canadian economy and the CAD. A drop in oil prices can weaken the CAD and support the USD/CAD pair's upward momentum.

Upcoming Economic Data Releases

Traders are eagerly awaiting key economic data releases that could provide fresh impetus to the USD/CAD pair. Canadian GDP numbers and the US Core Personal Consumption Expenditure (PCE) Price Index data, scheduled for Friday, are anticipated to be of particular importance.

US Economic Data

Recent economic data from the United States showed that the Conference Board Consumer Confidence for September dropped to 103.0 from August's 108.7, reflecting the impact of higher interest rates and concerns about the political environment. Building Permits for August came in at 1.541 million, up from the previous reading of 1.443 million. The House Price Index for July also rose to 0.8% month-on-month, surpassing market expectations.

Fed's Interest Rate Decision

In its September meeting, the Federal Reserve decided to maintain interest rates in the 5.25% to 5.50% range. Most Fed members still anticipate further rate hikes later in the year, which supports the USD's position against the CAD.

Looking Ahead

In the coming days, market participants will closely monitor the release of the US Durable Goods Orders report and the Core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred measure of consumer inflation. The PCE Price Index is expected to show a drop from 4.2% to 3.9%, which could impact trading decisions around the USD/CAD pair.

In summary, the USD/CAD pair is currently driven by a combination of USD demand, oil price movements, and upcoming economic data releases. Traders will be on the lookout for fresh insights and trading opportunities as these factors continue to shape the pair's movements.


Our preference

Long positions above 1.3485 with targets at 1.3545 & 1.3560 in extension.