By Ketki Saxena
Investing.com -- At 3:15 p.m ET, the USD/CAD pair was at C$1.2978 to a US dollar, down 0.37% in the day’s trading and with the day’s range of 1.2963 - 1.3050.
The Canadian dollar rallied against its US counterpart for the fourth day in a row, supported by gains in crude after last week’s heavy losses, while the greenback maintained its retreat against major currencies, as investors continued to consolidate gains ahead of tomorrow’s US CPI data.
While a 75 bps hike is widely expected and largely priced in for the Fed’s next move later this month following a string of hawkish comments from policymakers, investors expect tomorrow’s CPI data to indicate easing inflation for the second consecutive month, paring back bets for the Fed’s moves subsequent to September.
The loonie meanwhile was supported by gains in crude, with the prospect of an Iran Nuclear deal appearing to recede after France, Britain and Germany expressed “serious doubts” over the weekend about Iran’s intentions to conclude the nuclear deal.
Despite OPEC’s nominal production cuts announced last week, and the continuing lockdowns and steadily declining consumption in China - the world’s second-largest producer of crude - supply constraints remain at the forefront as the prospect of Iran’s contribution to the global crude market fades and the EU begins to shape its price cap on Russian oil.
At a technical level, analysts at Scotiabank (TSX:BNS) note that “CAD gains on the USD have lagged somewhat but the technical picture remains CAD-positive following last week’s second rejection of the low 1.32 area and the USD’s break under the double top neckline at 1.3075.”
Scotia analysts further note that “USD/CAD dips have been reluctant to extend through the upper 1.29s again today, similar to Friday, but the double top pattern implies downside potential to the 1.2940 area in the short run.”
Looking ahead, FX street analysts believe that “The broader market risk sentiment and the US bond yields will continue to play a key role in driving the USD demand on Monday. Apart from this, oil price dynamics will be looked upon for some short-term trading opportunities around the USD/CAD pair amid absent relevant market-moving economic releases, either from the US or Canada.”