USD/CAD Price Prediction – Weak Oil Puts Pressure On Canadian Dollar

Key Insights

• WTI oil declined below the key $100 level, which was bearish for the Canadian currency. 

• Traders will likely stay cautious ahead of U.S. inflation reports and BoC Interest Rate Decision, which will be released on Wednesday. 

• USD/CAD will need strong catalysts to get above the recent highs near 1.3080.

U.S. Dollar Moves Higher Against Canadian Dollar

USD/CAD continues its attempts to settle above 1.3050 while the U.S. dollar is losing some ground against a broad basket of currencies.

The U.S. Dollar Index gained downside momentum after EUR/USD failed to settle below the psychologically important 1.0000 level. EUR/USD has recently suffered a serious sell-off which took it from 1.0400 to 1.0000. The dynamics of this pair may have a material impact on trading in other forex pairs in the upcoming trading sessions.

Meanwhile, WTI oil found itself under material pressure and declined below the $100 level as traders reacted to the weak ZEW Economic Sentiment report from Germany. The report indicated that Germany’s Economic Sentiment declined from -28 in June to -53.8 in July, compared to analyst consensus of -38.3. This report highlighted recession risks and put additional pressure on commodities, which was bearish for the Canadian currency.

Traders Prepare For Wednesday

Wednesday will be an extremely busy day for USD/CAD traders. In the U.S., traders will focus on inflation data. Inflation Rate is expected to increase by 8.6% year-over-year in June, while Core Inflation Rate is projected to grow by 5.7%. Commodity markets have been moving lower in recent weeks, but it remains to be seen whether these moves had any material impact on the inflation data for June.

In Canada, traders will focus on the Bank of Canada Interest Rate Decision. BoC is expected to raise the rate by 75 bps. As usual, markets will be sensitive to the Bank’s commentary about the economic situation and its potential decisions in the future.

U.S. inflation data and BoC decision are very important catalysts for USD/CAD, so traders may stay cautious ahead of Wednesday. Most likely, USD/CAD will not get enough support to get above the recent highs near 1.3080 before traders have a chance to evaluate the key catalysts.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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