Canadian Dollar rebounds, bolstered by rise in Crude Oil prices

• The Canadian Dollar climbed 0.65% on Monday, supported by barrel bids.
• A general weakening in the US Dollar is further helping the Loonie.
• Canadian inflation data is due on Tuesday, expected to show another rise in inflation.

The Canadian Dollar (CAD) lurched higher by around two-thirds of one percent on Monday, bolstered by a geopolitical spike in Crude Oil prices, as well as a broad-market softening in Greenback bids that helped the Loonie gain a much-needed leg up.

Crude Oil prices lurched higher to kick off the new trading week, with West Texas Intermediate (WTI) barrel prices finding the $68 per barrel figure after US President Donald Trump vowed to take Houthis to task over the group's ramp-up of hostilities against civilian tanker ships in the Red Sea. While Middle East shipping lanes have little to do with North American Crude Oil markets, which are generally contained within industrial supply lines between Canada and the US, a general ramp-up of hostilities targeting shipping lanes tends to spark additional fear in commodity markets, juicing energy costs higher.

Canadian Consumer Price Index (CPI) figures are in the barrel for Tuesday, and are expected to show another broad uptick in Canadian inflation pressures. An upside print in key inflation metrics bodes poorly for the Bank of Canada (BoC), which slashed interest rates again last week despite an expected upturn in inflation on the cards. The BoC is cutting rates in order to try and increase affordability in the runaway train that is the Canadian housing market. Unfortunately for BoC head Tiff Macklem, last week's rate cut heading directly into another inflation upswing caused a general spike in Canadian bond markets, which most Canadian mortgages are priced against, causing housing funding costs to increase, not decrease.

Daily digest market movers: Canadian Dollar climbs ahead of key CPI inflation 

• The Canadian Dollar's Monday rally pushed USD/CAD back below both the 1.4300 handle and the 50-day Exponential Moving Average (EMA) at 1.4325.
• The Trump administration is gearing up for a direct conflict with Houthis in the Red Sea as the Middle East group vows to step up attacks on civilian and military ships in key supply lines.
• Annualized headline Canadian CPI inflation is expected to accelerate to 2.1% YoY on Tuesday, up from the previous print of 1.9%.
• Core BoC CPI inflation continues to ride above the Canadian central bank's 2.0% target, but markets are struggling to nail down a consistent forecast for Tuesday's print.
• Markets are gearing up for another Federal Reserve (Fed) rate call this week, due on Wednesday.

Canadian Dollar price forecast

The Canadian Dollar's Monday rally has put the Loonie back on pace to break out of its ongoing consolidation pattern against the US Dollar. USD/CAD has fallen back below 1.4300 as the CAD gains ground, but the next key technical level will be the 1.4200 handle.

Despite Monday's push lower in USD/CAD bids, the pair remains firmly entrenched in a sideways channel that has plagued the pair since December. CAD bidders will need to crack both the 1.4100 handle and the 200-day EMA at 1.4040 before a new Loonie rally can be confirmed.

USD/CAD daily chart