The USD/CAD pair attracted dip-buying during the Asian session on Thursday, stabilizing after a pullback from a three-week high of around 1.3620-1.3625 reached the previous day. However, the intraday increase lacks strong bullish momentum, suggesting caution before anticipating any significant upward movement.
The recent US Consumer Price Index (CPI) report indicated a general easing in consumer prices, but core CPI remains persistently high. This has diminished expectations for a larger 50-basis point rate cut by the Federal Reserve (Fed) at next week’s meeting. Consequently, US Treasury yields have risen, pushing the US Dollar (USD) closer to its monthly peak and supporting the USD/CAD pair.
The Federal Reserve is expected to initiate its policy easing cycle with a 25-bps rate cut at the September 17-18 meeting. Despite this, positive sentiment in the equity markets and a modest increase in Crude Oil prices are providing support for the Canadian Dollar (Loonie), capping the USD/CAD pair’s gains. This suggests that traders should wait for more decisive buying signals before making bullish bets.
Market participants are now looking ahead to the US Producer Price Index (PPI) release for potential market direction later in the North American session. The PPI data, along with US bond yields and overall risk sentiment, will influence USD demand. Additionally, fluctuations in Oil prices will present short-term trading opportunities for those following the USD/CAD pair.
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