Ella 
USD/CAD extended its gains to a ninth consecutive day, climbing to the 1.3785-1.3790 area during Monday’s Asian session, or its highest level since August 7. The momentum is supported by bullish U.S. dollar (USD) and lower crude oil prices, which tend to weaken the commodity-linked Canadian dollar.
The U.S. dollar index (DXY), which tracks the greenback against a basket of currencies, hit its highest level in nearly two months on Thursday as expectations grew for the Federal Reserve to ease policy. In fact, markets now see a greater than 90% chance that the U.S. central bank will cut borrowing costs by 25 basis points in November. This has caused U.S. Treasury bond yields to continue to rise, benefiting USD/CAD.
Meanwhile, crude oil prices opened the week with a gap lower, in reaction to softer Chinese inflation data released over the weekend, which suggested that deflationary trends persist and run counter to fuel demand. Additionally, disappointment over China’s fiscal stimulus largely overshadowed Friday’s upbeat Canadian jobs data, which forced investors to reduce their bets on a deeper rate cut from the Bank of Canada (BOC). This weighed on the Canadian dollar (CAD) and provided support for USD/CAD.
However, it remains to be seen whether bulls can capitalize on this move or choose to sell some profits ahead of the release of Canadian consumer inflation data on Tuesday. Meanwhile, the risk of further escalation of geopolitical tensions in the Middle East, as well as concerns about supply disruptions in key producing areas, should limit crude oil price losses. This, in turn, could dampen fresh CAD bear bets and cap the USD/CAD pair’s scarce liquidity against the backdrop of the U.S. and Canadian holidays.
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