- USD/CAD is increasing as Powell’s comments at the ECB Forum heighten expectations for rate cuts that were previously reduced in September.
- Federal Reserve Chairman Powell stated: “If the US economy remains solid, we should be cautious and wait.”
- PMI and JOLTS job data from the US ISM manufacturing sector have exceeded expectations, indicating a resilient US economy.
The Canadian Dollar (CAD) is trading lower against the US Dollar (USD) on Tuesday.
Central Bank representatives are gathering at the European Central Bank (ECB) Forum in Sintra, Portugal to discuss monetary policy insights.
As of this moment, USD/CAD is around 1.3640, with Powell expressing a commitment to wait for further inflation signs before considering any rate cuts.
“As long as the US economy is in solid form, I think it’s wise for us to wait and learn about the effects,” Powell mentioned.
Up to this point, Powell has been quite deliberate in his remarks, though investors believe this could change quickly based on incoming data.
“It will rely on data, and we will adjust at meetings as needed,” Powell added. “Nothing is set in stone until we see how the data evolves.”
These statements imply that the Fed is not in a rush to make rate cuts, which raises the chances of a cut in September. With ISM manufacturing and Jolts data showing resilience, it supports the idea of a data-sensitive Fed and bolsters USD/CAD.
PMI and JOLTS employment figures for ISM manufacturing indicate a strong US economy
Two detailed US economic reports released on Tuesday helped alleviate worries about the economy.
The first is the ISM Manufacturing PMI, which, despite predictions suggesting a drop into contraction territory at 48.8, actually showed growth from May’s 48.5 to June’s 49, exceeding expectations.
The second report, from the Job Openings and Labor Turnover Survey (JOLTS), had economists anticipating around 7.3 million job openings as of May 31. Instead, the report indicated an increase to 7.769 million, illustrating a robust US labor market.
Together, these two pieces of data provide a comprehensive view of both goods demand and labor demand, which are crucial components of the US economy.
USD/CAD Technical Analysis: Support Remains Above the 1.3600 Psychological Threshold
Daily charts for USD/CAD indicate that it is under pressure this Tuesday.
The current price is below the 20-day Simple Moving Average (SMA) at 1.3670, and the 50-day SMA is around 1.3779.
Although the pair recently broke from a downward channel, it has retraced somewhat, signaling that the downward trend might persist.
Main support is found at the psychological level of 1.3600; a break below could lead to the next target of around 1.3539 in June, with further declines possibly reaching the September low of 1.3419.
USD/CAD Daily Chart
Resistance levels to watch include the 78.6% Fibonacci retracement of an uptrend from September to February at 1.3714, with the 20- and 50-day SMA above that followed by a November low of 1.3823.
The 40-level relative strength index (RSI) indicates a strengthening of bearish momentum without entering oversold territory.
For a more positive short-term outlook, it will be important for the price to maintain above 1.3670 and the 50-day SMA.
