USD/CAD hovers above the 50-day EMA as US House Speaker Pelosi lands in Taiwan

• USD/CAD jumped on risk-off impulse, spurred by geopolitical jitters between the US and China.
• In the FX space, safe-haven peers like the USD, the JPY, and the CHF appreciate.
• Fed Daly: Fed needs to keep committed to bringing inflation down.

The USD/CAD climbs above the 50-day EMA, due to several factors, including the visit of US House Speaker Nancy Pelosi to Taiwan and increasing tensions between the US and China. That alongside expectations of the Federal Reserve pushing back against a perceived “dovish” tilt when Chair Powell acknowledged that spending and production softened.

The USD/CAD is trading at 1.2857 after hitting a daily low of 1.2835, then bouncing off the daily lows and climbing to its daily high at 1.2887.

USD/CAD advanced on risk aversion

Global equities remain under pressure. Albeit a hiccup upwards, as reports that the plane of House speaker Pelosi landed, the dust begins to settle down, and equities are back in the red. Earlier, US data showed signs of constraints in the labor market, as the US JOLTS Openings reported that vacancies fell to 10.7 million, its lowest since September 2021.

In the meantime, the US Dollar Index, a gauge of the greenback’s value vs. a basket of peers, rises 0.05% and sits at 105.882, underpinned by haven flows, as geopolitical tensions uprise, weighing on the Loonie.

Fed officials have begun to cross wires. The San Francisco Fed President, Mary Daly, said so far, is “pleased” with the Fed decisions, but the Fed is “nowhere near” being almost done in fighting inflation. She added that the Fed needs to “keep committed until we actually see it in the data.”

On the Canadian side, the S&P Global Manufacturing PMI remains in the expansionary territory around 52.5, much lower than the forecasted, and trailed June’s 54 figure.

Elsewhere, crude oil prices begin to rise, putting a lid, on the rise of the USD/CAD, due to the CAD’s positive correlation with oil. WTI is trading at $94.00 PB, slightly up 0.25%.

What to watch

Additional Fed speakers will cross wires through the day, led by Charles Evans, Loretta Mester and James Bullard.

USD/CAD Key Technical Levels