USD/CAD ducks back below fresh cycle highs in the 1.3800s

• USD/CAD holds in bullish territory with the US dollar spiking to fresh bull cycle highs.
• Market volatility has dented the high beta CAD in the face of weaker oil prices.

At 1.3770. USD/CAD is up over 1.3% on the day as the pair tries to hold on to near the highs of the day at 1.3808 following a surge from the day's low of 1.3559. It has been a strong day for US bond yields with sky-high volatility in global currency markets that has seen the US dollar extending its gains to 114.52 as per the DXY index.

Investors continued to fret about the Federal Reserve's aggressive policy tightening and its impact on the US economy which has seen a sell-off across financial markets and a bid into the greenback. This also added an extra layer of volatility to markets worried about a global recession amid soaring prices. The CBOE Volatility index, hovered near three-month highs while the US 10-year Treasury yield is rising again on Monday, hitting 3.9020%, which is a fresh high back to April 2010. 

''CAD is not immune to this deterioration in conditions,'' analysts at TD Securities said. ''We were bearish the CAD for fundamental reasons as the debt servicing problem should start to manifest and create a data domino over the balance of the year, while worsening global growth meant that the currency would also be on the defensive.''

''With oil prices in retreat as global demand wanes, CAD will continue to struggle. If you did not like the CAD a week ago, there is more reason to despise it further. We are now entering the FOMO stage of USD/CAD.''

The price of oil, one of Canada's major exports, clawed back some recent losses as market participants awaited for details on new sanctions on Russia. However, oil had fallen to new eight-month lows as recession worries continue to dominate trading while the US dollar continues to strengthen. West Texas Intermediate crude is still down by over 3.4% on the day to $76.63.

In domestic data, wholesale trade rose 0.8% in August from July, largely driven by higher sales in the food, beverage and tobacco subsector, a preliminary estimate from Statistics Canada showed. Meanwhile, more than a third of customers in the Canadian province of Nova Scotia were without power on Monday, two days after powerful storm Fiona battered the east coast of the country.