USD/CAD advances to near two-week high

The USD/CAD pair has gained positive momentum for the fourth consecutive trading day, reaching a nearly two-week high around the 1.3545 region during the Asian session.

This positive move is primarily driven by a modest increase in US Dollar (USD) demand, but bullish crude oil prices may limit further gains in the pair. The initial market reaction to Tuesday’s disappointing US Durable Goods Orders faded quickly due to growing acceptance that the Fed will keep interest rates higher for longer.

This helps the USD Index (DXY) build on the overnight bounce from a 200-day Simple Moving Average (SMA) and acts as a tailwind for the USD/CAD pair.

Crude oil prices are standing near the monthly peak touched on Tuesday and underpin the commodity-linked Loonie, which could further contribute to capping gains for the USD/CAD pair.

Talks of an extension to production cuts from OPEC+ and attacks on ships in the Red Sea by Iran-aligned Houthis in Yemen continue to support Crude Oil prices. Traders may also prefer to wait on the sidelines ahead of the US Personal Consumption Expenditures Price Index on Thursday. The crucial US inflation data will provide fresh cues about the Fed’s rate-cut path, driving USD demand and determining the next leg of a directional move for the USD/CAD pair.