USD/CAD consolidates in a range around mid-1.2600s, US CPI awaited
- A combination of factors failed to assist USD/CAD to gain any meaningful traction.
- Rising crude oil prices underpinned the loonie and acted as a tailwind for the major.
- A modest USD pullback further collaborated to cap gains ahead of the US CPI report.
The USD/CAD pair struggled to capitalize on its modest intraday gains and was last seen trading in the neutral territory, around mid-1.2600s during the early European session.
The pair managed to regain some positive traction on Tuesday and recovered a part of the previous day's intraday slide from the vicinity of the 1.2700 mark. However, a combination of factors held bulls from placing aggressive bets and kept a lid on any meaningful gains for the USD/CAD pair.
WTI crude edged higher for the third successive day and climbed the highest level since August 3, closer to the $71.00 mark amid concerns that another storm could affect output in the US Gulf Coast. This could underpin the commodity-linked loonie and act as a headwind for the USD/CAD pair.
On the other hand, the US dollar moved further away from the two-week tops touched on Monday, which might further keep a lid on any meaningful upside for the major. The USD bulls moved on the sidelines and preferred to wait for a fresh catalyst from Tuesday's release of the US consumer inflation figures.
The US CPI report will be looked upon for fresh clues about the likely timing of the Fed's tapering plan. This, in turn, will play a key role in influencing the USD ahead of the FOMC monetary policy meeting on September 20-21 and provide a fresh directional impetus to the USD/CAD pair.
The US Producer Price Index (PPI) for August recorded the largest gain since November 2010 and indicated that higher inflation could persist for some time. A stronger US headline CPI print will reaffirm expectations about an imminent Fed taper announcement and boost to the greenback.
Nevertheless, the fundamental backdrop makes it prudent to wait for some follow-through buying before positioning for any further gains. Even from a technical perspective, the USD/CAD pair's inability to reclaim the 1.2700 round-figure mark warrants some caution for aggressive bullish traders.
Technical levels to watch