USD/CAD Daily Outlook Update The US Dollar (USD) gained against the Canadian Dollar (CAD) for the fourth straight day today as rising expectations of a Federal Reserve (Fed) rate hike tomorrow overshadowed the typical positive effect of rising oil prices on the Canadian Dollar. The USD/CAD pair has broken through resistance at 1.3870, targeting the monthly high at 1.3940 and above. According to ING analysts, "The dollar would benefit from a rate hike because it would add some further credibility to the monetary policy decisions of the Fed and would devalue a little bit the debasement trade," a theme which had "evolved over the past year both due to concerns about the Fed's independence and more recently due to Treasury interventions." In Canada, today's spotlight is on August's CPI figures, which are expected to remain stagnant, with a $0.5 increase recorded in July. CPI growth is steady at 0.2% for BoC CPI, the same as the previous month. These numbers do not put significant pressure on the BoC to raise interest rates, and without an inflation surprise, they will not support a CAD rebound. USD/CAD is currently trading at 1.3893, above the previous two weeks' price-range ceiling of 1.3870. The rise, along with the higher low seen in the previous week, may imply the formation of a Gartley pattern, targeting the high reached on September 2 (1.3940) and the 78.6% Fibonacci retracement of the August downtrend (1.4050). Momentum oscillators on the daily chart confirm the outlook, with RSI(14) crossing above the key 50 level, while the MACD histogram shows positive but not aggressive bullish momentum. However, on the downside, a drop below 1.3870 will find support around 1.3835, Friday's low. A break below the September 9 low of 1.3766 will invalidate the bullish bias.
