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After extending its post-NFP gains on Monday, the US dollar rose further in the first half of Tuesday’s session, lifting the USD/CAD to a key resistance area. Traders were largely sitting on their hands ahead of this week’s inflation data from the US, as well as several other data releases from around the world and a rate decision by the European Central Bank on Thursday. The dollar has found mild support and has stopped falling since the last week of August. The month of August itself was a bearish month for the greenback as investors bought foreign currencies on the back of softness in US data. It looks like the market has now mostly priced in Fed’s expected rate cuts, totalling around 100 basis points for this year. Unless this week’s CPI comes in way below expectations, it looks like the Fed will start the rate cutting cycle with a standard 25 basis points on September 18, instead of 50 bps priced in a few weeks ago. This should still be negative for the US dollar. The greenback will require a run of stronger data to turn decisively higher; else the bearish USD/CAD outlook and trend that started in August will remain intact.
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