The USDCAD pair reached a three-month high of 1.3640 following Powell’s optimistic stance on inflation and the possibility of more interest rate increases. Currently, it is being traded at 1.3613.

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• Powell’s hawkish tone on inflation and potential for further rate hikes propels USD/CAD to a three-month high of 1.3640, currently trading at 1.3613.

The pair currently trades last at 1.36245.

The previous day high was 1.3589 while the previous day low was 1.351. The daily 38.2% Fib levels comes at 1.3559, expected to provide support. Similarly, the daily 61.8% fib level is at 1.354, expected to provide support.

USD/CAD edged higher for the second straight day and refreshed three-month highs at 1.3640, following the Federal Reserve Chair Powell’s hawkish speech, which triggered volatility across the board. Later, Patrick Harker from the Philadelphia Fed emphasized rates are at a restrictive stance. The USD/CAD is trading at 1.3613, printing gains of 0.36%.

Opening remarks from the US Federal Reserve Chair Jerome Powell showed the central bank is still worried about high inflation, as he mentioned that further rate hikes could be ”appropriate,” though they would remain data dependent. Powell stated that although two months of good data on inflation are reasonable, there’s a long way to go, as he emphasized the Fed’s 2% inflation target.

Regarding the solid economic growth and a tight labor market, Fed Chair Powell warranted additional tightening. Further rate increases are justified if those economic indicators do not show signs of easing. Powell acknowledged the risks of over and under-tightening while foreseeing the July Personal Consumption Expenditure (PCE) at 3.3% and core PCE at 4.3%.

Of late, a slew of his colleagues are crossing the wires. Philadelphia Fed Patrick Harker noted that rates are already restrictive, and if inflation stalls, then more rate increases may be needed. On the other hand, Cleveland Fed President Loretta Mester acknowledged the economy had gathered momentum as shown by GDP and labor market figures stating that below growth would be needed to cool down inflation. She stressed the debate is if current rates are restrictive enough to achieve the inflation target.

On the Canadian front, stagnant June retail sales stood at 0.1% MoM, compared to the previous reading, suggesting that Canadians are spending less, despite more robust than expected figures earlier in the year, which warranted additional tightening by the Bank of Canada.

Next week, the US economic docket will feature the CB Consumer Confidence, JOLTs report, preliminary GDP data, inflation figures, and ISM PMIs. On the Canadian front, the agenda will reveal GDP

From a technical perspective in the short term, the USD/CAD has peaked so far at around the R2 pivot point at 1.3640, retraces towards the confluence of the R1 daily pivot and the 38.2% Fibonacci retracement at 1.3610/12. Dip buyers could emerge at the latter, or the 50% Fibonacci retracement, at around 1.3603 before diving below the 1.3600 figure. Contrarily, a drop below the day’s low of 1.3567 could pave the way for further downside, exposing the 200-hour Moving Average (HMA) at 1.3539.

Technical Levels: Supports and Resistances

USDCAD currently trading at 1.3612 at the time of writing. Pair opened at 1.3582 and is trading with a change of 0.22 % .

The pair remains strongly bullish on the daily timeframe. It trades above its 20 SMA @ 1.3435, 50 SMA 1.3301, 100 SMA @ 1.3388 and 200 SMA @ 1.3458.

The previous day high was 1.3589 while the previous day low was 1.351. The daily 38.2% Fib levels comes at 1.3559, expected to provide support. Similarly, the daily 61.8% fib level is at 1.354, expected to provide support.

Note the levels of interest below:

• Pivot support is noted at 1.3532, 1.3481, 1.3452
• Pivot resistance is noted at 1.3611, 1.364, 1.369

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