- US Dollar Index builds on last week’s gains.
- Trading action is likely to remain subdued on Monday.
- Bank of Canada is expected to keep policy rate unchanged this week.
The USD/CAD pair continued to rise steadily and closed the seventh week in a row in the positive territory last week. With the USD preserving its strength on Monday, the pair inched higher and touched its best level since August 23 at 1.3338. As of writing, the pair was up 0.15% on the day, trading at 1.3330.
USD strength drives the pair higher
Last week, the broad-based selling pressure surrounding major European currencies and recovering US Treasury bond yields allowed the greenback to outperform its rivals. The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, rose to its highest level since May 15 above the 99 handle before retreating slightly going into the weekend. At the moment, the DXY is adding 0.25% on the day at 99.05.
The data published by the US Bureau of Economic Analysis last week showed that the real economy expanded by 2% in the second quarter as expected and the Personal Consumption Expenditure (PCE) Price Index, the Federal Reserve’s preferred gauge of inflation, remained steady at 1.6% on a yearly basis in July to support the DXY’s rally.
On the other hand, the barrel of West Texas Intermediate gained around 2% last week to help the commodity-related CAD limit its losses against the USD.
Later this week, the Bank of Canada (BoC) is expected to keep its policy rate unchanged at 1.75% but investors will be paying close attention to the language in the bank’s policy statement. According to the latest Reuters poll, 22 of 39 economists that participated in the survey didn’t expect any changes to the bank’s policy rate.
Technical levels to watch for
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