The USD/CAD currency pair remained flat around 1.3850 during early European trading hours on Friday, as market participants adopted a wait-and-see approach ahead of Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole symposium later in the day. This event is anticipated to provide insights into the Fed's policy outlook, particularly regarding interest rates and inflation targets, with traders seeking clarity on whether further rate hikes are likely [1].
Recent data showed that the core Personal Consumption Expenditures (PCE) Price Index inflation was in line with market expectations, which led to an increase in the probability of a September Fed rate hike to 40%, up from 36% prior to the data release, according to the CME FedWatch Tool [1]. Analysts, such as Mark Cabana from Bank of America, expect Warsh to signal readiness to raise rates again if inflation does not continue to moderate. However, if the speech focuses on broader structural themes, markets may interpret the message as dovish [1].
The Canadian Dollar faces additional headwinds from escalating trade tensions between the US and Canada. The Canadian Department of Finance announced the addition of 50% tariffs on US-made copper wire and wood charcoal, replacing previous tariffs on fish and seafood products [1]. Standard Chartered economists suggest that, despite the recent tariff escalation, the Bank of Canada (BoC) is likely to wait for more data to assess the impact of these measures on growth and inflation before making any policy shifts. The combination of a Q2 growth rebound and uncertainty over the effects of new US measures provides the BoC with scope to remain on hold for now [1].
From a technical perspective, USD/CAD maintains a bearish bias, trading below both the 20-day and 100-day simple moving averages. The Relative Strength Index (RSI) around 40 indicates subdued upside momentum, with risks skewed toward a deeper corrective phase. Key resistance is identified in the 1.3905–1.3915 area, while a break above this level could open the way toward 1.4065. On the downside, the pair is slipping away from the upper half of the recent Bollinger envelope [1].
CONCLUSION
The Canadian Dollar is trading flat as markets await key signals from the Jackson Hole symposium and monitor the impact of escalating US-Canada trade tensions. With the Fed's policy outlook and the BoC's response to tariffs still uncertain, traders are likely to remain cautious in the near term.