Geopolitical Risk
The important meeting between US President Donald Trump and Russian leader Vladimir Putin in Alaska ended on Friday without any major progress.
However, Trump said on Monday that Ukrainian President Volodymyr Zelenskiy could end the war with Russia quickly if he chooses to. Trump, Zelenskiy, and key European leaders are set to meet later today to discuss ending Europe’s deadliest war in 80 years.
The move has kept Oil prices on edge of late with WTI trickling lower over the past few trading sessions. Weaker WTI oil prices have weighed on the Canadian Dollar and could aid a move higher for the pair if the decline continues.
Bearish FED Outlook Gathers Pace
Confidence that the Federal Reserve is ready to cut two or three times this year sees investors happy to remain long risk assets. The increasing probability of rate cuts will also weigh on the US Dollar but for now it appears the Canadian Dollars weakness is overshadowing the US Dollar weakness. This sets the pair up for further gains.
Wednesday sees the release of the minutes of the July FOMC meeting, where two dissented for a 25bp rate cut. Of greater interest, however, will be Chair Jerome Powell's speech at the Jackson Hole symposium this Friday afternoon.
The Jackson Hole meeting could set the tone for the US Dollar moving forward.
Data Ahead Which Could Affect USD/CAD
The week ahead brings data from both the US and Canada. The FOMC minutes and the S&P PMI data will be released from the US which could stoke some volatility in the pair.
Tuesday will bring Canadian inflation data which is cooler but not quite where the Bank of Canada would like it to be.
Canada’s central bank is unlikely to speed up rate cuts as its preferred inflation measure stayed high at 3% in June. The Bank of Canada lowered its policy rate to 2.75% in July but plans to move cautiously due to stubbornly high service prices, tariffs, and weakening demand.
This makes the CPI release tomorrow all the more interesting. A drop in inflation could aid USD/CADs move to the upside and facilitate a test of the 200-day MA.
Technical Analysis - USD/CAD
From a technical standpoint, USD/CAD is back above the 100-day MA but continues to grind higher.
The varying risks for the pair is currently keeping any significant moves at bay but there is a growing probability that further upside may materialize
The pair is still showing a bullish trend after pulling back and holding support at a previous resistance level.
Looking at the RSI and it is currently hovering around the 60 mark. This is another sign that bullish momentum remains intact.
Immediate resistance rests at 1.3860 before the 1.4000 and 200-day MA at 1.4035 comes into focus.
A move lower from here may find support at 1.3747 before the most recent swing low at 1.3588 comes into focus.
