- The USD/CAD attracts continuation buyers for the fourth consecutive day on Tuesday.
- The continuous positive movement of the USD and the recoil of oil prices act as a tail wind for the torque.
- Operators expect US data to obtain a new impulse before the FOMC decision on Wednesday.
The USD/CAD pair prolongs its upward trend for the fourth consecutive day on Tuesday and rises to a maximum of a week and a half, above half of 1,3700 during the early European session. The impulse is sponsored by the sustained purchase of the US dollar (USD). In addition, a modest fall in crude oil prices is observed to weaken the Loonie linked to raw materials and acting as a tail wind for cash prices.
The optimistic macroeconomic data of the US published last week pointed to a resilient labor market. In addition, the concerns that the highest US tariffs revive inflationary pressures in the second half of the year suggest that the Federal Reserve (FED) would maintain the status quo at the end of a two -day policy meeting on Wednesday. This, in turn, raises the USD index (DXY), which tracks the value of the dollar against a foreign exchange basket, a peak of more than a month and turns out to be a key factor that drives the USD/CAD torque to the rise.
Meanwhile, a stronger dollar in general is observed weighing on the raw materials called in USD, including crude oil prices. In addition, the punitive tariffs of 35% of the president of the US, Donald Trump, on Canada imports seem to exert pressure on the Canadian dollar (CAD) and contribute to the purchase tone surrounding the USD/CAD torque. This, in turn, supports the possibility of an additional short -term appreciation movement for cash prices, although the bulls could refrain from opening new positions and waiting for more clues about the Fed Rate Touror Trajectory.
Therefore, the approach will remain focused on the crucial FOMC meeting that begins this Tuesday. It is widely expected that the US Central Bank maintain stable interest rates. However, investors will closely examine the accompanying policy statement and the comments of the president of the FED, Jerome Powell, at the press conference after the meeting. This, in turn, will influence the USD and will provide a new impulse to the USD/CAD torque. Meanwhile, US macroeconomic data on Tuesday could generate short -term opportunities later during the American session.
Canadian dollar – frequent questions
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BOC), the price of oil, the main export product of Canada, the health of its economy, inflation and commercial balance, which is the difference between the value of Canadian exports and that of its imports. Other factors are market confidence, that is, if investors bet on riskier assets (Risk-on) or seek safe assets (Risk-Off), being the positive risk-on CAD. As its largest commercial partner, the health of the US economy is also a key factor that influences the Canadian dollar.
The Canada Bank (BOC) exerts a significant influence on the Canadian dollar by setting the level of interest rates that banks can provide with each other. This influences the level of interest rates for everyone. The main objective of the BOC is to maintain inflation between 1% and 3% by adjusting interest rates to the loss. Relatively high interest rates are usually positive for CAD. The Bank of Canada can also use quantitative relaxation and hardening to influence credit conditions, being the first refusal for CAD and the second positive for CAD.
The price of oil is a key factor that influences the value of the Canadian dollar. Oil is the largest export in Canada, so the price of oil tends to have an immediate impact on the value of the CAD. Generally, if the price of oil rises, the CAD also rises, since the aggregate demand of the currency increases. The opposite occurs if the price of oil drops. The highest prices of oil also tend to give rise to a greater probability of a positive commercial balance, which also supports the CAD.
Although traditionally it has always been considered that inflation is a negative factor for a currency, since it reduces the value of money, the opposite has actually happened in modern times, with the relaxation of cross -border capital controls. Higher inflation usually leads to central banks to raise interest rates, which attracts more capital of world investors who are looking for a lucrative place to save their money. This increases the demand for the local currency, which in the case of Canada is the Canadian dollar.
The published macroeconomic data measure the health of the economy and can have an impact on the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence surveys can influence the CAD direction. A strong economy is good for the Canadian dollar. Not only attracts more foreign investment, but it can encourage the Bank of Canada to raise interest rates, which translates into a stronger currency. However, if the economic data is weak, the CAD is likely to fall.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
