USD/CAD Steady as Markets Eye Jackson Hole, Trade Tensions

Key Moments

USD/CAD Holds Flat Ahead of Warsh’s Jackson Hole Speech

The USD/CAD pair is trading virtually unchanged near 1.3850 in early European dealings on Friday, as investors largely refrain from taking fresh positions ahead of Federal Reserve Chair Kevin Warsh’s keynote address at the Jackson Hole symposium later in the day. Market participants are looking to the speech for signals on his policy stance and potential guidance on the path of interest rates.

Core Personal Consumption Expenditures (PCE) Price Index inflation data released on Wednesday matched market forecasts, reinforcing expectations for tighter policy. Following the data, traders increased wagers on a Federal Reserve rate increase in September. The CME FedWatch Tool showed the probability of a September hike rising to 40% from 36% before the release.

The Jackson Hole symposium is expected to shed light on Warsh’s assessment of the US economic outlook, the interest rate trajectory, and the Federal Reserve’s strategy for returning inflation to its 2% target. Any tone perceived as hawkish from Fed officials could help stem recent softness in the US Dollar in the short term.

“In short, we expect Warsh to signal that he is prepared to raise rates again if inflation does not continue to moderate,” said Mark Cabana, head of U.S. rates strategy at Bank of America. “By contrast, if he uses the speech to focus solely on broader structural themes such as productivity or demographics, we worry markets could interpret the message as dovish.”

Trade Frictions Add Pressure to the Canadian Dollar

Beyond US monetary policy, rising trade frictions between the United States and Canada remain a source of potential weakness for the Canadian Dollar (CAD), providing support for USD/CAD. According to the Department of Finance, Canada has imposed 50% tariffs on US-produced copper wire and wood charcoal, adding these products to its retaliation list. They replace fish and seafood products, which have been removed from the list.

BoC Expected to Wait for Clearer Tariff Fallout

Standard Chartered economists see the Bank of Canada (BoC) remaining cautious in the face of the latest trade developments. They argue that “despite the recent tariff escalation, policy makers may want to wait for more data to gauge the impact of the new tariffs on growth and inflation.”

In their assessment, the recent rebound in Q2 economic growth, combined with uncertainty over how new US measures will affect the Canadian economy, gives the BoC room to keep policy steady while it evaluates whether the shock will significantly reshape the medium-term outlook.

Technical Picture: Bearish Tone Below Key Moving Averages

From a technical perspective, USD/CAD maintains a bearish bias on the daily chart, with spot trading below both the 20-day Bollinger simple moving average (SMA) and the 100-day SMA. The pair is drifting away from the upper half of the recent Bollinger envelope, while the Relative Strength Index (14) hovering around 40 indicates muted upside momentum and tilts risks toward a deeper corrective move.

A sustained break above the 1.3905–1.3915 resistance cluster would be needed to alleviate immediate downside risks and potentially shift focus toward the upper Bollinger band near 1.4065. On the downside, a clear violation of support around the lower band at approximately 1.3740 would strengthen the bearish tone on the daily timeframe.