Euro Area inflation reports boosted demand for safe-haven assets, which was bullish for the U.S. dollar.
Meanwhile, the rebound in the oil markets provided some support to the Canadian dollar.
It remains to be seen whether U.S. dollar will be able to gain strong momentum against Canadian dollar ahead of the long weekend.
U.S. Dollar Moved Higher Against Canadian Dollar
USD/CAD has recently made an attempt to settle above 1.2950 as the U.S. dollar gained strong upside momentum against a broad basket of currencies.
The U.S. Dollar Index settled above the 105 level and tested the resistance at 105.50. In case the U.S. Dollar Index manages to settle above 105.50, it will move towards the yearly highs near 105.80, which will be bullish for USD/CAD.
The U.S. dollar managed to gain strong momentum after the release of the flash readings of Euro Area inflation reports. Euro Area Inflation Rate increased by 0.8% month-over-month in June, compared to analyst consensus of 0.5%. On a year-over-year basis, Euro Area Inflation Rate increased by 8.6%. This is the highest level since the creation of the euro.
The data from the EU raised demand for the safe-haven U.S. dollar and provided significant support to USD/CAD.
Stronger Oil May Provide Some Support To The Canadian Currency
In the U.S., traders had a chance to take a look at the final reading of the Manufacturing PMI report for June. The report indicated that Manufacturing PMI declined from 57 in May to 52.7 in June, compared to analyst consensus of 52.4. This report had little impact on currency dynamics.
Traders will also monitor the developments in the oil markets, which may have a material impact on the dynamics of commodity-related currencies. WTI oil has recently managed to find some support despite recession fears. In case WTI oil manages to gain additional upside momentum, USD/CAD may be able to settle back below the 1.2900 level.
It should be noted that the U.S. dollar may fail to gain significant upside momentum against the Canadian dollar ahead of the long weekend as trading volume will decrease.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
More From FXEMPIRE:
Palestinians pin scant hope on Biden visit after setbacks under Trump
Sudan security forces skirmish with demonstrators after protest deaths
Wall Street ends first day of third quarter with solid rebound
Biden predicts states will try to arrest women who travel for abortions
U.S. sending Ukraine two surface-to-air missile systems – Pentagon
Brazil posts trade surplus of $8.8 billion in June