USD/CAD snaps a five-day losing streak on market caution, rebounds to near 1.3460

• USD/CAD moves higher as the market adopts a cautious stance ahead of inflation data from the United States.
• The headline US Inflation is expected to show an easing to 2.9% in January from 3.4% prior.
• Upbeat WTI price could provide support for the Canadian Dollar.

USD/CAD breaks a five-day declining trend as the US Dollar (USD) strengthens, with traders adopting a cautious stance ahead of the release of United States (US) inflation data scheduled for Tuesday. During the Asian session, the USD/CAD pair trades higher around 1.3460.

Market expectations for the US Consumer Price Index (CPI) indicate a potential moderation, with a year-on-year (YoY) increase of 2.9%, down from the previous rise of 3.4%. The monthly rate is forecasted to remain unchanged at 0.2%. The YoY core CPI is expected to rise by 2.9%, a decrease from the previous increase of 3.4%. The monthly core inflation is anticipated to remain steady at 0.3%.

The US Dollar Index (DXY), which measures the USD against a basket of six major currencies, continues its upward momentum for the second consecutive session, trading around 104.20. Despite this, the Greenback may be restrained by subdued US Treasury yields, with the 2-year and 10-year US yields at 4.47% and 4.18%, respectively, by the press time.

Conversely, the Canadian Dollar could find support from the buoyant Crude oil prices, as Canada is one of the largest exporters of oil to the United States. West Texas Intermediate (WTI) oil price extends its winning streak, which began on February 5, bolstered by heightened geopolitical tensions in the Middle East.

As geopolitical tensions escalate with reports of Yemen’s Houthi rebels launching missiles at a ship bound for a port in Iran, the West Texas Intermediate (WTI) oil price inches higher to $77.00 per barrel. On a positive note, the incident only caused minor damage to the vessel, and there were no injuries to the crew.

Meanwhile, in Canada, the economic calendar for the week lacks high-impact data releases. However, low-impact indicators such as Thursday’s Housing Starts are anticipated to show a slight improvement, while Friday’s Wholesale Sales are expected to dip slightly.