USD/CAD aims to cross 1.3750 as DXY refreshed day’s high, US Inflation buzz

• USD/CAD is preparing for a break above 1.3750 as DXY has refreshed its day’s high at 112.94.
• The tight US labor market has filled the Fed with confidence for announcing a bigger rate hike in November.
• The loonie bulls have failed to capitalize on better-than-projected Canada employment data.

The USD/CAD pair is aiming to demolish the back-and-forth moves structure that remained in a narrow range of 1.3720-1.3740 in the early European session. The asset is preparing for an impulsive rally following the footprints of the US dollar index (DXY). The DXY has refreshed its day’s high at 112.94On a broader note, the asset is oscillating around the weekly hurdle of 1.3750 and may remain in the bullish arena amid negative market sentiment.

The release of the upbeat US Nonfarm Payrolls (NFP) data on Friday has pumped the odds of a 75 basis point (bps) rate hike by the Federal Reserve (Fed). The upbeat economic catalyst has terrified investors, which has resulted in a bearish performance by S&P500. Also, the 10-year US Treasury yields have reached near 3.90%.

A tight labor market has provided confidence to the Fed to announce a bigger rate hike unhesitatingly. A fourth consecutive 75 bps rate hike announcement by the Fed will push the interest rates to 3.75-4%, close to the targeted rate of 4.4%, as discussed in September’s dot plot.

Going forward, the US Consumer Price Index (CPI) data will remain in limelight. Previously, the headline CPI dropped to 8.3%, however, the core CPI was escalated. It is expected that weaker gasoline prices will keep the headline CPI in check, therefore, the spotlight will remain on the core CPI. As per the consensus, the economic data is expected to improve to 6.5% from the prior release of 6.3%.

Meanwhile, loonie bulls have failed to capitalize on better-than-projected employment data. The Net Change in Employment landed at 21.1k, higher than the projections of 20k. Also, the Unemployment Rate declined to 5.2% from the expectations and the prior release of 5.4%.

On the oil front, the announcement of the production cuts by OPEC+ has titled the short-term trend towards the north. Apart from that, the reopening of China after a golden week holiday is promising that the demand for oil will pick up as Chinese manufacturing activities were shut down during the holiday period.  It is worth noting that Canada is a leading oil exporter to the US and higher fund inflows will strengthen its fiscal balance sheet.