The Canadian Dollar remains sideways following Jerome Powell’s statements

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The Canadian Dollar (CAD) showed little movement on Monday, with few significant data points available and a lack of impactful statements from the US Federal Reserve (Fed) that left markets without direction. 

The only economic data from Canada this week will be May’s building permits, to be released on Friday, but this is not expected to significantly impact the market. The CAD has remained steady against the US Dollar (USD), and the lack of Canadian data leaves the CAD vulnerable to broader market trends. 

Fed Chairman Jerome Powell delivered the first half of his two-day testimony before the US Congress committees on Tuesday, presenting the Fed’s semi-annual Monetary Policy Report to the Senate Banking, Housing, and Urban Affairs Committee.  

Fed Chairman Powell adopted a familiar tone, reiterating previously made points and emphasizing the Fed’s readiness to wait as long as necessary for inflation to reduce towards the Fed’s annual target of 2%. Investors, hoping for more signals that the Fed was moving towards interest rate cuts, interpreted his remarks as more aggressive than expected. This reduced risk appetite and strengthened the Dollar. 

Fed Chairman Powell will give the second half of the Fed’s Monetary Policy Report to the House Financial Services Committee on Wednesday. No changes in rhetoric or new information are expected in this follow-up presentation. 

Later in the week, the US Consumer Price Index (CPI) for June is scheduled for release on Thursday, followed by the US Producer Price Index (PPI) for June on Friday. The core CPI for June is expected to remain stable at 3.4% year-on-year, while the core PPI for the same period is expected to rise to 2.5% from 2.3% in the previous period. Meeting these forecasts would disappoint markets, which are overwhelmingly betting on a slowdown in inflation to justify at least a quarter-point rate cut by the Fed at the September 18 rate meeting. 

Technical Outlook for USD/CAD 

The USD/CAD is stalled near 1.3640, staying afloat and moving in a tight range as the pair continues to struggle to break above 1.3650. Last week’s rebound from the recent low at 1.3600 failed to push the pair above the 200-hour exponential moving average (EMA) at 1.3656, but buying pressure remains too high to allow a drop to new lows. 

Daily candles of the USD/CAD are caught in a technical trap, stuck in congestion between the 200-day EMA at 1.3590 and a supply zone above the recent high near 1.3750.