The US Dollar is gaining strength over the Canadian Dollar, prompted by Federal Reserve Chair Jerome Powell’s recent statements underscoring a data-dependent approach. During the ECB Forum in Sintra, Portugal, Powell emphasized monitoring inflation signs before any rate cuts, affecting the USD/CAD exchange rate.

Key US economic data recently surpassed expectations. The ISM Manufacturing PMI surpassed the forecast, reporting 49 instead of the anticipated 48.8. The JOLTS data showed 7.769 million job vacancies, higher than the predicted 7.3 million, signalling a robust labour market.

Technical Outlook Of Usd Cad

Technically, USD/CAD trades below key moving averages, indicating pressure on the loonie. While the pair dropped after breaching a descending channel, support levels are critical at 1.3600, with resistance at Fibonacci and SMA levels. A move beyond these could shift market sentiment.

The US Dollar, a global trading heavyweight, accounts for 88% of all foreign exchange turnover. The Federal Reserve’s monetary policy decisions, such as adjusting interest rates, greatly impact its value. In events of economic distress, the Fed’s quantitative easing may weaken the Dollar, whereas quantitative tightening typically strengthens it.

Powell’s comments in Portugal echoed a familiar refrain—wait for the data. Nothing pre-emptive, nothing knee-jerk. He confirmed that rate cuts remain on hold until inflation convincingly aligns with target. This selective approach isn’t new, but confirmation from him pulls it into sharper focus.

The stronger-than-expected ISM Manufacturing PMI, scant though the gain was, offered yet another upward nudge to the Dollar. Especially since even the sub-50 range doesn’t suggest contraction that is gaining traction. Meanwhile, the JOLTS report surprised many. Over 7.7 million job openings paints a different portrait than most thought possible at this point in the cycle. The labour market, whatever minor cracks may appear, continues to hold—and that matters.

Market Reactions And Predictions

Market participants are likely already running new scenarios. More vacancies than expected feed into continued wage pressures, which in turn may challenge inflation’s slow descent. For those traders focusing on interest rate differentials, it becomes tricky to bet against the Greenback right now. Every data print like this keeps the Fed comfortable with holding the line.

From a technical angle, support near 1.3600 could become a battleground. If it holds, we may see range-bound action in the short term. A rejection of lower levels accompanied by another round of strong US metrics may push USD/CAD closer to the 1.3750 region. Especially with overhead Fibonacci markers aligning with slower-moving averages, that zone will matter. A breakout through those levels may shift expectations and recalibrate short-term trading models.

We’ve also been watching CAD’s broad behaviour during risk-on and risk-off periods. With oil prices not offering much tailwind either, it’s harder for the Canadian currency to find independent strength. This is particularly relevant as positioning unwinds and tactical exposure grows twitchy depending on macro prints.

In general, what stands out is that volatility in this pair isn’t fuelled by surprises in direction, but by the refinement of timing expectations. And that refinement is being driven almost entirely by soft consensus—economic data leads, and central banks follow. This is clearly the rhythm the market is dancing to for now.

So, from our seat, we’re paying careful attention to Canadian employment data and domestic inflation inputs. If the Canadian side doesn’t offer upside shocks, then bearish pressure could remain lopsided, even if the move is slow-burning. Until that point, the USD may keep the upper hand, even if only marginally. Cross-asset confirmation, particularly from bond pricing and oil futures, will help confirm any break in direction.

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