The trend of the USD/CAD currency pair going up in the early European session continued on Tuesday. In the last hour, people who want to buy US dollars have pushed spot prices above 1.3600.

After a slight pause on Monday, the USD is back in demand and at its highest level in seven months because the Fed is tightening its policies. The markets now think the US central bank will have to raise interest rates more than expected to stop inflation from staying high. Last Friday’s US PCE Price Index showed that inflation isn’t falling as fast as expected, which made people bet more.

Even though interest rates are increasing, the US economy seems to be doing well, so the Fed should be able to keep being hawkish. This makes the yields on US Treasury bonds go up again, which helps the Dollar. Even though there are risks of a recession and tensions in international politics, the Greenback is still a relatively safe place to put your money.

Crude Oil prices increase helps the Loonie, which is tied to commodities, but USD/CAD bulls aren’t fazed. The best way for the pair to go is up. Traders are waiting for the monthly GDP report from Canada at the start of the North American session. The US Consumer Confidence Index from the Conference Board and regional manufacturing PMIs are examples of economic data from the US.

Trade Idea

So, US bond yields and how people feel about risk will drive up demand for the dollar. Changes in oil price should also help the USD/CAD pair and let traders take advantage of short-term opportunities.