Usdcad in consolidation as markets await Canadian CPI and Powell testimony

USDCAD Analysis

Performance after Monday
Period	Pct	Chg	Momentum
Monday	-0.03%	-3.8 Pips
Week to-date	-0.04%	-6 Pips
June	-0.09%	-13 Pips

Upcoming key events (London Time)

Tue 01:30 PM CAD CPI Inflation Rate (12-mth)
Tue 03:00 PM USD Federal Reserve Chair Jerome Powell testifies

What happened lately

In Canada, an important economic event on the horizon is the release of the Consumer Price Index (CPI) Inflation Rate, scheduled for Tuesday at 1:30 PM. As a high-impact event, this release will offer insights into the inflationary pressures within the Canadian economy. The CPI is a vital gauge for inflation, reflecting the cost change in goods and services that are key components of household expenditure. A higher-than-expected CPI reading may indicate rising inflation, potentially influencing the Bank of Canada’s decisions regarding interest rate adjustments. Higher interest rates could strengthen the Canadian dollar by attracting foreign investments seeking better returns. Conversely, a lower reading might signal softer inflation, which could cause the Canadian dollar to weaken if market participants anticipate continued accommodative monetary policy.

In the United States, significant attention is directed towards Federal Reserve Chair Jerome Powell’s testimony on Tuesday at 3:00 PM. Powell’s testimony is a major focal point for market participants looking for cues on the Federal Reserve’s future monetary policy plans. The testimony can influence expectations on the trajectory of interest rates and other policy measures. Should Powell hint at a more hawkish Federal Reserve stance, possibly suggesting rate hikes to combat inflation, the US dollar may strengthen as investors seek the higher yields. Conversely, a dovish tone indicating caution towards raising rates could weaken the US dollar as it may prolong the lower interest rate environment.

As for the USDCAD currency pair, these developments can have a pronounced effect. A stronger-than-expected CPI print in Canada could lead to Canadian dollar appreciation, putting downward pressure on the USDCAD. Similarly, if Powell’s testimony boosts confidence in a more aggressive Fed monetary policy, we might witness US dollar strength, causing USDCAD to potentially rise. However, if the testimony suggests patience in tightening measures, alongside a moderate inflation read from Canada, the pair could continue its consolidation phase. Traders will closely monitor these events, as the outcomes could be decisive for the pair’s direction in the short term, which is currently in a consolidation phase just below 1.37300 after a slight drop of 0.03% on Monday.

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What can we expect from USDCAD today?

USDCAD on Monday dropped -0.03% to 1.37292. Price is above 9-Day EMA while Stochastic is falling in overbought zone.

Updated daily direction for USDCAD looks mixed as the pair is likely to consolidate above 1.37008 (S1).

Looking ahead today, to see upside interest, we prefer to look at price breakout of last daily high of 1.37981 or trades above daily pivot 1.37494. Break above could target R1 at 1.37779. While to the downside, we are looking at 1.37008 (S1) and daily low of 1.37210 as support levels. USDCAD need to break on either side to indicate a short-term bias. A close below 1.37210 would indicate selling pressure.

For the week to-date, take note that USDCAD is mixed as compared to the prior week.

Key levels to watch out:

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