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USD/CAD stalls as Fed inflation stance faces softer jobs data
Fed Chair Kevin Warsh reaffirmed the 2% inflation target and pushed back on rate-cut pressure, while near 4% PCE keeps a September hike on the table.
USD/CAD has paused after several weeks of gains, entering a period of uncertainty as the market weighs competing signals from the US and Canada, Action Forex said.
On the US side, Fed Chair Kevin Warsh reiterated the Fed’s 2% inflation target and resisted political pressure to cut rates. At the same time, sticky PCE inflation near 4% supports the odds of a September hike, though Action Forex pointed to softer June payrolls and stretched speculative USD positioning as reasons the rally may not extend much further.
The next catalysts are expected US CPI and PPI releases, which could either strengthen the case for hikes or limit further dollar strength, Action Forex added. In Canada, the June jobs report beat expectations and reduced the odds of a BoC cut, but the loonie remains pressured by falling oil prices, subdued inflation, and unresolved CUSMA trade uncertainty.
Technically, Action Forex said the pair has traded in an ascending channel since May lows and is consolidating just below recent swing highs. The article highlighted the 1.4100 area as key support, with a move back above about 1.4250 seen as validating further upside, while a break below the ascending trendline would be the first meaningful warning sign and could bring tests of Fibonacci retracement levels around 1.3900 to 1.4000.