USD/CAD benefits from Tuesday’s stronger US Dollar

The US dollar gains momentum as US yields surge ahead of FOMC decision. On the data front; Canada’s CPI rose 0.4% in February, core up 0.5%.

The USD/CAD pair’s support lies at 1.3650 with no change. The USD/CAD pair bottomed at 1.3643 following the release of Canadian inflation data, the lowest since March 7 and then rebounded sharply benefitting from the stronger US Dollar, approaching 1.3740.

The move to the upside occurred amid rising US yields that boosted the US dollar. The US 10-year yield approached 3.60% and the 2-year is back above 4.00%.

The Federal Reserve has already started its two-day monetary policy meeting. On Wednesday, the US central bank is expected to announce a 25 bps rate hike to 4.75% – 5.00%. Attention is set on how the Fed assess current development regarding the banking sector turmoil. Ahead of the decision, the US dollar is posting mixed results.

Data released on Tuesday showed the Consumer Price Index dropped to the lowest level in 13 months from 5.9% to 5.2%, below the 5.4% of market consensus; the core rate fell from 5% to 4.7%. The CAD rose marginally after the report. Despite falling versus the US dollar on Tuesday, CAD is up for the second day in a row versus AUD and NZD.

The USD/CAD peaked during the American session at 1.3736 and it is hovering around 1.3730. It rose almost a hundred pips from the daily low.

The pair was rejected from under the key support area of 1.3350. If the Loonie consolidates below, more losses seem likely. On the upside, USD/CAD is testing a downtrend line, and above 1.3740, the upside could extend further.