Dollar Soars Against Loonie as Rate Hike Bets Send CAD into Tailspin
The US Dollar (USD) has gained momentum against the Canadian Dollar (CAD), posting its fourth consecutive daily gain on Monday.
This appreciation is attributed to rising bets of a Federal Reserve (Fed) rate hike, which would boost the dollar's monetary policy credibility and reduce the 'debasement trade,' according to analysts at ING.
The USD/CAD pair has broken through resistance at 1.3870, with bulls targeting the monthly high at 1.3940 and potentially higher.
Technical analysis suggests a Gartley pattern, with momentum indicators in the daily chart supporting the bullish view. However, a bearish reaction below 1.3870 could face support at Friday's low near 1.3835 or negate the bullish view if the September 9 low at 1.3766 is broken.
The Canadian Consumer Price Index (CPI) data for August is expected to have stalled, which may not put pressure on the Bank of Canada (BoC) to hike interest rates, and thus hinder the CAD's recovery.