USDCAD is moving in box pattern and market has reached resistance area of the pattern
USD/CAD: Traders Eye Fed Chair Powell’s Testimony for Clues on Rate Cuts
USD/CAD edges lower as traders await the testimony of Fed Chair Jerome Powell to the US Senate on Tuesday. The pair is dominated by the US Dollar as the Canadian data schedule remains uneventful till next week. Markets keep betting on the Federal Reserve cutting US interest rates in September, a potential negative for USD/CAD. USD/CAD edges higher on Tuesday, to trade in the 1.3640s, as it continues its broadly range-bound consolidative market mode of the last three-month period. Most of the emphasis is on the US Dollar side of the pair as traders await Federal Reserve (Fed) Chairman Jerome Powell’s testimony to the Senate Banking Committee, whilst Canada sees no scheduled macroeconomic events until Building Permits are released on Friday.
Fed Chair Powell’s Expected Testimony
Fed Chair Jerome Powell is set to address the Senate Banking Committee, and all eyes are on his testimony. Powell’s last significant speech, at the central-bankers’ gathering in Sintra, suggested a shift from a strictly data-dependent approach to acknowledging positive signs in inflation. However, he emphasized the need for more evidence to determine if these signs were significant and sustainable.
Powell is likely to maintain a cautious stance, keeping markets uncertain about the timing of the Fed’s next policy move. This uncertainty is a key factor influencing the USD/CAD pair, as traders speculate on the implications of potential rate cuts.
Market Expectations and Recent Data
Market sentiment has been leaning towards the expectation of a rate cut by the Federal Reserve. Over the past two weeks, probabilities for a 0.25% rate cut in the September meeting have increased, driven by a series of underwhelming economic data releases. Notably, the ISM Services PMI for June fell into contraction territory, and the labor market showed signs of weakening, with the Unemployment Rate rising for the third consecutive month to 4.1%.
While the NonFarm Payrolls (NFP) report exceeded expectations with 206K new jobs added, revisions to previous months’ data cast a shadow on the labor market’s strength. Inflation data has also shown signs of cooling, with Average Hourly Earnings remaining flat and the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, edging down.
USDCAD is moving in box pattern and market has rebounded from the support area of the pattern
Canadian Data and Economic Outlook
In Canada, the labor market appears to be struggling more than in the US. The Canadian version of the NFP report revealed a rise in the Unemployment Rate to 6.4%, the highest since January 2022, surpassing forecasts. Additionally, payrolls dropped by 1.4K when economists had expected a rise. These labor market stresses have been attributed to high interest rates, which have hindered companies’ access to credit.
The Bank of Canada (BoC) is under pressure to cut interest rates further to stimulate the economy. After reducing the policy rate by 0.25% to 4.75% in June, the BoC may consider additional cuts to address the weakening labor market.
Summary
Traders are closely monitoring Fed Chair Jerome Powell’s testimony for hints on future rate cuts. With market sentiment leaning towards a September rate cut by the Federal Reserve, the USD/CAD pair is influenced by the broader economic landscape and data releases. While the US shows signs of cooling inflation and a weakening labor market, Canada faces its own challenges with high unemployment and economic strain.
As the market navigates these uncertainties, Powell’s comments will be crucial in shaping expectations and influencing the USD/CAD pair’s direction. For now, traders remain focused on the potential for rate cuts and the broader economic outlook in both the US and Canada.
Don’t trade all the time, trade forex only at the confirmed trade setups
Get more confirmed trade signals at premium or supreme – Click here to get more signals , 2200%, 800% growth in Real Live USD trading account of our users – click here to see , or If you want to get FREE Trial signals, You can Join FREE Signals Now!
