USD/CAD Hits 3-Month Highs as Market Awaits Powell’s Jackson Hole Speech

USD/CAD Climbs to Fresh Highs Amid Shifting Fed Rate Cut Expectations

The USD/CAD pair has surged to a fresh three-month high of 1.3915 on Friday, continuing its bullish run for the fourth consecutive session. This latest gain comes amid a strengthening US Dollar, fueled by easing expectations for a Federal Reserve rate cut in September. As the market prepares for Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium, investors remain keen on any clues about the central bank’s upcoming policy decisions.

Fed Rate Cut Odds Ease, Strengthening USD

According to the CME FedWatch Tool, market participants are now pricing in a 74% probability of a rate cut in September, down from 82% earlier this week. This shift follows the release of stronger-than-expected US economic data, including robust Purchasing Managers’ Index (PMI) figures and rising Initial Jobless Claims.

• The preliminary S&P Global US Composite PMI edged higher to 55.4 in August, surpassing the previous reading of 55.1.
• The US Manufacturing PMI showed strong growth, increasing to 53.3 from 49.8, exceeding the consensus estimate of 49.5.
• The Services PMI slipped slightly to 55.4 but remained stronger than the expected 54.2.

Moreover, Initial Jobless Claims rose to 235K for the prior week, signaling potential softening in the US labor market, although it still remains relatively low.

Canada’s Economic Data Adds Pressure on CAD

While the USD continues to show strength, the Canadian Dollar also gained support from the latest domestic data. Canada’s Industrial Product Price Index (IPPI) for July rose by 0.7%, exceeding market expectations of a 0.3% increase. This came after a 0.5% rise in June and reflects stronger-than-anticipated inflationary pressures within Canada.

USD/CAD Technical Analysis – Bulls Eyeing 1.40

Despite the strong performance of the US Dollar, the upside for USD/CAD could face resistance at the 1.3915 mark as traders await further guidance from Jerome Powell’s speech at the Jackson Hole Symposium. If Powell signals a more dovish stance or hints at further easing, the Canadian Dollar could recover, capping gains for USD/CAD.

On the downside, the pair may find support near the 1.3800 zone, with any corrective pullbacks viewed as potential buying opportunities. A sustained push above 1.3915 could open the door for further upside, targeting the psychological 1.4000 level.

Key Levels to Watch:

• Resistance: 1.3915 (3-month high), 1.4000 (psychological level)
• Support: 1.3800, 1.3750 (previous lows)

Traders should remain cautious as market sentiment fluctuates ahead of Powell’s speech, with the USD/CAD pair potentially seeing further volatility as new economic data and policy signals emerge.

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