USD/CAD rises as Fed Powell confirms data-dependent stance, strong U.S. ISM and JOLTS data

• USD/CAD rises as Fed Powell’s comments at the ECB Forum raise expectations of a rate cut in September.
• Fed Chair Powell: “As long as the US economy is in a solid shape, the prudent thing to do is wait.”
• The US ISM Manufacturing PMI and JOLTS job data beat expectations, reflecting a more resilient US economy.

The Canadian Dollar (CAD) is edging lower against the US Dollar (USD) on Tuesday, as traders digest the latest remarks from Federal Reserve (Fed) Chair Jerome Powell. 

Central bank speakers gather at the European Central Bank (ECB) Forum in Sintra, Portugal, providing insight into monetary policy.

As of this writing, USD/CAD is hovering near 1.3640, as Powell remains committed to waiting for additional signs of inflation pressures before cutting rates. 

“As long as the US economy is in solid shape, we think that the prudent thing to do is to wait and learn more and see what those effects might be,” Powell said.

So far, Powell has adhered to the cautious script, but investors are aware that this could shift quickly if the data dictates otherwise.

Additionally, Powell stated that “It’s going to depend on the data, and we are going meeting by meeting.” “I wouldn’t take any meeting off the table or put it directly on the table. It’s going to depend on how the data evolves.”

These comments suggest that the Fed is not rushing to cut rates, increasing the potential for a September cut. With the US ISM Manufacturing and JOLTS data beating expectations, a resilient US data remains supportive of a more data-dependent Fed, providing a boost for USD/CAD.

ISM Manufacturing PMI and JOLTS employment numbers reflect a resilient US economy

Two closely watched US economic reports released in the United States on Tuesday have helped alleviate concerns about the US economy.

First is the Institute for Supply Management’s Manufacturing Purchasing Managers’ Index (ISM Manufacturing PMI).The forecast called for a 48.8 print, which falls in contraction territory, hinting at softness in the industrial sector. The June data came in above expectations at 49, rising from 48.5 in May. 

The second is the Job Openings and Labor Turnover Survey (JOLTS), where economists had expected around 7.3 million open positions as of May 31. Instead, the latest report revealed that job vacancies rose by 7.769 million, reflecting a resilient US labour market.

Together, these two data points provide a solid snapshot of both the demand for goods and the demand for labor, two key components of the US economy.

USD/CAD technical analysis: Loonie remains supported above psychological support at 1.3600

The USD/CAD daily chart shows the loonie continues to trade under pressure on Tuesday. 

Prices currently remain below the 20-day Simple Moving Average (SMA) at 1.3670 and the 50-day SMA around 1.3779. 

The pair had recently broken above a descending channel but has since pulled back, suggesting the downward trend may continue. 

Key support lies at the 1.3600 psychological level, a break of which could open the door for the June low of 1.3539. A further drop could potentially target the September low at 1.3419. 

USD/CAD daily chart

Key resistance levels to watch include the 78.6% Fibonacci level of the September-February uptrend, located at 1.3714. The 20-day and 50-day SMAs are situated above, followed by the November low at 1.3823. 

The Relative Strength Index (RSI) at 40 is reinforcing bearish momentum without entering oversold territory.

A sustained move above 1.3670, particularly beyond the 50-day SMA, would be needed to shift the short-term outlook to bullish.