Ella 
USD/CAD rallied for a fourth straight day on Wednesday, rising to a near two-week high near 1.3545 in Asia. While bullish crude oil prices may prevent further gains in USD/CAD, a slight pick-up in U.S. dollar demand has helped USD/CAD move higher.
The initial market reaction to Tuesday’s weaker-than-expected U.S. durable goods orders quickly faded as more and more people believe that the Federal Reserve will keep interest rates higher for longer. This in turn boosted the U.S. Dollar Index (DXY), which tracks the greenback against a basket of currencies, to continue higher, building on an overnight rebound from the 200-day simple moving average (SMA), a key technical level, and acting as a “tailwind” for USD/CAD.
Nonetheless, the risk of a U.S. government shutdown, a new round of declines in U.S. bond yields, and a rebound in global stock markets may all act as headwinds for the safe-haven dollar. Meanwhile, crude oil prices stood near the monthly high hit on Tuesday, supporting the commodity-linked Canadian dollar. This could further limit USD/CAD gains, so bullish traders will need to be cautious.
Negotiations by OPEC+ to extend production cuts continued to provide support to crude prices following attacks on ships in the Red Sea by Yemen’s Iran-aligned Houthi rebels. This, in turn, would support the commodity-linked Canadian dollar and restrain USD/CAD from further gains. Traders may prefer to stay on the sidelines ahead of Thursday’s release of the U.S. personal consumption expenditures price index.
This crucial US inflation data will provide new clues on the path of interest rate cuts by the Federal Reserve, which in turn will drive demand for US dollars and help determine the next move of the USD/CAD currency pair. Meanwhile, traders will take cues from the release of preliminary U.S. fourth-quarter gross domestic product (GDP) numbers, which, coupled with speeches from key Fed officials, could generate short-term USD/CAD gains late in the North American session. Trading Opportunities.
