USD/CAD enters a bearish consolidation phase near the 1.5-week low set on Tuesday.
Rising crude oil prices continue to benefit the CAD and act as a headwind for the pair.
On the other hand, the weakness of the dollar does not impress the bulls waiting for the release of the US CPI too much.
The USD/CAD pair is trading in a range just above 1.3550 during Wednesday’s European session, consolidating losses recorded in the last three days to a 1.5-week low hit the previous day.
Crude oil prices are near their 10-month peak and remain well supported by concerns about a tightening global supply. The Organization of the Petroleum Exporting Countries (OPEC) reported in its monthly report on Tuesday that tensions in oil markets will continue this year amid strong demand and lower production. This comes on top of major supply cuts announced by Saudi Arabia and Russia, the world’s two largest oil producers, for the rest of 2023 and continues to benefit the black gold. Rising oil prices are benefiting the commodity-linked CAD, which, along with the subdued price action of the US Dollar (USD), is acting as a headwind for the USD/CAD pair.
The DXY dollar index, which measures the greenback’s strength against a basket of currencies, is weakening near weekly lows as traders appear unwilling to trade ahead of the release of U.S. consumer inflation figures later this year. aggressive positions to open the American session. The US CPI report could provide new clues about the Federal Reserve’s (Fed) future interest rate hike. This, in turn, will play a key role in influencing the USD and helping determine the next directional move for the USD/CAD pair. Meanwhile, expectations of another 25 basis point Fed rate hike later this year continue to support elevated US Treasury yields and limit the USD’s decline.
Investors appear to be convinced that the US Federal Reserve will stick to its hawkish stance and keep interest rates high for longer. These expectations were reinforced by US macroeconomic data released last week, which suggested the economy was still robust. Additionally, the fact that inflation is not cooling quickly enough supports the prospects of further Fed tightening. This, in turn, requires some caution before bracing for an extension of the USD/CAD pair’s recent decline from near the 1.3700 level, the highest level since March, reached last week.