USD/CAD inter-markets: should challenge multi-month highs on hawkish FOMC minutes

Having risen to nearly 9-month high in the previous week and a subsequent corrective slide, the USD/CAD has managed to regain some traction and traded with positive bias for the second straight session on Wednesday.

A sharp surge in the US 10-year Treasury bond yields, taking along the Canadian 10-year bond yields, has been supportive of the pair's strong up-move of over 300-pips since Donald Trump's surprise victory in the US presidential election. However, a sharp recovery in crude oil prices extended support to the commodity-linked currency - Loonie and trigger a near-term corrective slide.

The pair has managed to recover from sub-1.3400 support and is currently trading around mid-1.3400s. The pair's latest leg of up-move from has been purely led by renewed greenback buying interest as market participants now seemed convinced that the Fed would certainly raise rates at its December meeting. 

Moreover, retracing crude oil prices, with WTI crude oil now turning back below $48.00 mark, is further contributing to the pair's ongoing recovery momentum. Moving ahead, today’s official EIA report on domestic crude stockpiles would drive oil prices from current levels and provide some impetus for the major.

Meanwhile, the broader trend would remain dependent on the Federal Reserve’s near-term monetary policy outlook and hence, today’s FOMC meeting minutes would play an important role in determining the next leg of directional move for the major. Any hints of a faster Fed rate-tightening cycle would turn out to be highly positive for the greenback and trigger a sharp rally for the major, lifting it beyond recent highs. 

To learn more about this topic, check our video analysis