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The USD/CAD pair has renewed its fresh high in the year at 1.3052. the pair is attempting to balance above the 1.3000 psychological resistance. USD/CAD also managed to continue its winning streak by positive performance on Tuesday.
USD/CAD is likely to further advance amid uncertainty over the release of the US Consumer Price Index during the following New York session. The US dollar has been strongly against its Canadian counterpart while investors do expect CPI reading above 8%, which would consolidate the 75 basis point (bps) interest rate hike option by FOMC next June.
The yearly US CPI is likely to edge lower to 8.1% against the multi-decade high figure of 8.5%. While the Core CPI, excluding food and energy prices, is expected to shift lower to 6% from the prior print of 6.5%.
Such a reading could ease out the Fed’s aggressive stance a little bit but a jumbo rate hike announcement will remain on the table. The US dollar index is likely to recapture its 19-year high at 104.19 ahead of the US inflation data.
As for oil, lower fuel prices are also underpinning the US dollar against the Canadian dollar. Oil prices settled below the psychological support of $100.00 on Tuesday as higher interest rates can captivate liquidity from the US economy, which may result in demand’s retreat.
Canada is the biggest exporter of oil to the US and lower oil prices result in lower cash inflows for Canada, in addition, China’s COVID-19 related lockdowns hurt oil demand due to restrictions on the movement of humans, materials, and machinery.
