- USD/CAD is rising, bolstered by high US bond yields underpinning the dollar.
- Canada’s CPI rose below forecasts but remains above the 7% threshold.
- US housing data was mixed, although rising mortgage rates are likely to continue to hurt the housing market.
USD/CAD rises to new all-time highs, above the 1,330 mark, invalidating a previous triple top chart pattern, thanks to a buoyant US dollar coupled with falling crude oil prices are a tailwind for USD/CAD.
USD/CAD is rising strongly after hitting a daily low around 1.3226, also driven by advances in US Treasury yields, led by the 10-year yield at 3,563%, given expectations that the Federal Reserve will raise rates by at least 75 basis points. At time of writing, USD/CAD is trading at 1.3365, up 0.83% on the day.
USD/CAD exceeds 1.3300 thanks to the strength of the US dollar
Earlier in the North American session, Statistics Canada reported that inflation in the country remains higher, but softened a tone, recording figures below estimates. The Consumer Price Index (CPI) for August rose 7% year-on-year, less than estimates of 7.3% and below the 7.6% figure for July. Month-on-month, inflation fell 0.3%, more than a 0.1% contraction. According to the report, the drop in gasoline prices and the slowdown in housing growth are the main reasons for the drop in inflation.
The so-called core CPI, which excludes volatile items, dipped slightly from 5.4% y/y in July to 5.2% in August. Sources quoted by Reuters said that “today’s figures reinforce our view that the Bank of Canada may only have one 50 basis point rate hike left, while the Fed could keep raising rates longer and to higher levels.”
On the other hand, the figures for housing starts and building permits for August were published on the US economic docket. The former unexpectedly rose above forecasts, while the latter showed signs of rising mortgage rates, slowing to their slowest pace in two years.
For its part, the Dollar Index, which measures the value of the greenback against six other pairs, rises 0.57%, to 110,215, while the yield on 10-year US Treasury bonds rises eight basis points, to the 3.571%, which is a boost for the USD/CAD.
What to watch out for
A missing Canadian docket would leave USD/CAD traders hanging on the dollar’s dynamics. On the US economic calendar, US Existing Home Sales, the Fed decision and Jerome Powell’s press conference would shed some light on the path of the US central bank.
USD/CAD Key Technical Levels
Source: Fx Street
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