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USD/CAD slides as Powell turns dovish, Canadian Retail Sales upbeat

  • USD/CAD drops 0.49% to 1.3835 after Powell’s dovish Jackson Hole speech and upbeat Canadian Retail Sales.
  • Powell: “Risks to inflation tilted to upside, risks to employment to downside — a challenging situation.”
  • Markets now price in 50 bps easing by year-end, with September cut odds rising from 75% to 90%.

USD/CAD tumbles over 0.49% during the North American session as Fed Chair Jerome Powell leaned dovish and strong Canadian Retail Sales boosted the Loonie. At the time of writing, the pair trades at 1.3835 after hitting a daily high of 1.3924.

Fed Chair’s remarks lift rate cut bets while robust Canada data boosts Loonie

At the Jackson Hole Symposium, the Fed Chair Jerome Powell stated that “risks to inflation are tilted to the upside, and risks to the employment to the downside—a challenging situation.” He said that tariffs could create a “one-time” effect in inflation and that it would take some time to be reflected.

Despite reiterating the Fed’s commitment to the dual mandate, Powell said that “downside risks to the labor market are rising” and that “the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”

During Powell’s speech, investors had fully priced in 50 basis points (bps) by year-end, and the chances of a September 25 bps cut rose from 75% to 90%.

He added that “the stability of the unemployment rate and other labor market measures allows us to proceed carefully.”

In Canada, Retail Sales rose as expected in June, rebounding from a dip in May. Sales increased 1.5% MoM, up from a 1.2% MoM contraction a month ago. Excluding autos, sales surged by 1.9% exceeding forecasts of 1.1%.

USD/CAD Price Forecast: Technical outlook

Despite retreating, the USD/CAD uptrend remains intact, unless the pair dives below the August 7 low of 1.3721. Nevertheless, to extend its losses, the pair must clear the 20-day SMA at 1.3801, followed by the 100-day SMA at 1.3784.

On the other hand, if USD/CAD is set for a recovery, traders must push the exchange rate above 1.3900, so they have a chance of challenging the 200-day SMA at 1.4033.

Canadian Dollar Price This week

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies this week. Canadian Dollar was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.07%0.15%-0.28%0.15%0.22%0.95%-0.58%
EUR0.07%0.20%-0.24%0.21%0.29%0.99%-0.51%
GBP-0.15%-0.20%-0.54%0.01%0.09%0.78%-0.76%
JPY0.28%0.24%0.54%0.46%0.54%1.27%-0.29%
CAD-0.15%-0.21%-0.01%-0.46%0.05%0.80%-0.77%
AUD-0.22%-0.29%-0.09%-0.54%-0.05%0.69%-0.86%
NZD-0.95%-0.99%-0.78%-1.27%-0.80%-0.69%-1.55%
CHF0.58%0.51%0.76%0.29%0.77%0.86%1.55%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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