USD/CAD refreshes daily low post-Canadian CPI/US housing market data, lacks follow-through

• USD/CAD edges lower and refreshes daily low during the early North American session.
• The mixed Canadian/US macro data fails to provide any meaningful impetus to the pair.
• The fundamental backdrop supports prospects for the emergence of some dip-buying.

The USD/CAD pair witnessed some selling during the early North American session and refreshes it's daily low in reaction to US/Canadian macro data. The pair is currently trading with modest intraday losses, just below the 1.2900 round-figure mark.

A modest bounce in crude oil prices seems to underpin the commodity-linked loonie and act as a headwind for the USD/CAD pair. Spot prices edge lower and seem rather unaffected by Canadian consumer inflation figures. Statistics Canada reported that the Canadian CPI decelerated to the 7.6% YoY rate in July from the 8.1% in the previous month. More importantly, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, unexpectedly eased to the 6.1% YoY rate from the 6.2% in June.

This, along with some follow-through US dollar buying for the third straight day, should offer some support to the USD/CAD pair. In fact, the USD climbs to a fresh monthly high and continues to draw support from expectations that the Fed would stick to its policy tightening path. Apart from this, an uptick in the US Treasury bond yields and recession fears offset mixed US housing market data and favour the USD bulls, supporting prospects for the emergence of some dip-buying around the major.

Traders, meanwhile, might refrain from placing aggressive bets ahead of the FOMC monetary policy meeting minutes, scheduled for release on Wednesday. The markets have priced in at least a 50 bps Fed rate hike at the September meeting and the minutes would be looked upon for clues about the possibility of a larger, 75 bps move. Hence, it would be prudent to wait for strong follow-through selling before confirming that the recent recovery from over a two-month low touched last week has run its course.

Technical levels to watch