USD/CAD hits multi-week highs around 1.3045

The USD/CAD hit fresh two-month highs above the 1.3000 figure on risk aversion, falling crude prices and broad-based US dollar strength as traders prepare for the US Federal Reserve Economic Symposium. USA at Jackson hole. Between these and other factors, the USD/CAD is trading at 1.3038, up 0.37% at the time of writing.

Wall Street extended its losses as the Fed’s hawkish rhetoric weighed on traders’ sentiment. Yields on US Treasury bonds rose between three and six basis points, while the dollar index, a gauge of the value of the dollar against a basket of currencies, broke through the 109,000 point barrier and rose one 0.84%.

Over the past week, Fed officials have reiterated the need to reduce inflation, led by the San Francisco Fed’s Mary Daly, who said it was premature to “declare victory” over inflation, while adding that she foresees an increase of 50 or 75 basis points for the September meeting. St. Louis Fed President James Bullard echoed his comments, saying that he was leaning towards 75 basis points and stressed the need to get to the 3.75%-4% range at End of the year. In his view, it will take 18 months for prices to return to the Fed’s 2% target.

Meanwhile, money market STIR futures indicate that the Fed will raise interest rates by a minimum of 50 basis points by September, while the odds of a 75 basis point hike stand at 82.8%.

On the Canadian front, the absence of the Canadian docket left investors adrift on market sentiment and oil prices. Meanwhile, the price of oil is staging a comeback, changing hands at $89.49 bps, but remains 0.39% below its opening price, having hit a daily low of 86.29 $.

Although the Bank of Canada is expected to continue to tighten monetary policy, it will trail the Federal Reserve slightly, with forecasts for a 50 basis point hike that would lift rates to 3%. Apart from this, according to Reuters, speculators have increased their bullish bets on the Loonie to its highest level since July 2021, as US CFTC data released on August 19 shows, with long positions rising to 21,223 to 26,867.

The Canadian economic docket will feature Average Weekly Earnings for Thursday. Meanwhile, for Friday, the US calendar will reveal S&P Global PMIs, the Fed speech led by Minnesota’s Neil Kashkari, along with inflation numbers, ahead of Jerome Powell’s Jackson Hole speech.

USD/CAD Key Technical Levels