USD/CAD bulls ignore firmer Oil price to aim for 1.3600, Fed Chair Powell’s defense of hawkish policy eyed

• USD/CAD edges higher around monthly top after rising the most in three weeks.
• Broadly firmer US Dollar propels Loonie pair even as upbeat US Manufacturing details, China hopes underpin Oil price rebound.
• Central bank talks will be crucial for immediate directions amid doubts about “higher for longer” rates.
• Fed Chair Powell needs to defend hawkish policy moves, rule out rate cuts to keep Greenback on the front foot.

USD/CAD holds onto the bullish bias targeting the key 1.3600 upside hurdle despite the early Asian session inaction on Friday. Also challenging the Loonie pair buyers is the cautious mood ahead of Federal Reserve (Fed) Chairman Jerome Powell’s speech at the Jackson Hole Symposium. That said, the quote rose the most in three weeks the previous day while approaching the highest level since late May marked Wednesday.

While tracing the USD/CAD pair’s latest jump, the broad US Dollar strength gains major attention whereas a recovery in the Oil price, Canada’s main export, challenges the upside momentum towards the multi-day-old descending resistance line surrounding 1.3605.

The US Dollar Index (DXY) remains firmer around the highest level in 11 weeks after refreshing the multi-day peak by rising the most since August 02. On the other hand, WTI crude oil defends the previous day’s rebound to the lowest level in a month while making rounds to $78.50.

It’s worth noting that the mostly firmer US data and hawkish Fed speak, as well as the market’s anxiety ahead of the top-tier central bankers’ speeches underpin the US Dollar’s run-up. On the other hand, Oil price cheers hopes of more stimulus from China and the latest rebound in the US manufacturing gauges.

That said, US Durable Goods Orders for July marked the biggest slump since April 2020 by posting -5.2% MoM figure versus -4.0% expected and 4.4% prior growth (revised). However, the Durable Goods Orders ex Transportation marked a positive surprise with 0.5% figures versus 0.2% market forecasts and previous readings. Further, the Nondefense Capital Goods Orders ex Aircraft also improved to 0.1% while matching the analysts’ estimations compared to -0.4% marked in June.

Additionally, the Chicago Fed National Activity Index for July improved to 0.12 from -0.33 prior whereas the Kansas Fed Manufacturing Activity Index for August was 12.0 versus -20.0 previous readings. On the same line, the weekly figures of the Initial Jobless Claims and Continuing Jobless Claims eased and signaled positive employment conditions.

Talking about the Fed signals, St. Louis Federal Reserve President James Bullard also underpinned the US Dollar’s post-data rebound. “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon,” said Fed’s Bullard in an interview with Bloomberg. While Bullard was hawkish, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of rate hike trajectory whereas Boston Federal Reserve President Susan Collins defended a “higher for longer” bias for rates.

Against this backdrop, Wall Street closed in the red while the benchmark US 10-year Treasury bond yield prints mild weekly losses despite rising to the highest level since 2007 earlier in the week, as well as posting firmer closing the previous day.

Moving on, a light calendar can restrict the USD/CAD moves ahead of the all-important Fed Chair Powell’s speech. That said, the Loonie pair buyers will seek a defense of the hawkish monetary policy to keep the reins.

Technical analysis

A four-month-old descending resistance line around 1.3605 appears a tough nut to crack for the USD/CAD bulls as RSI conditions seem overbought. The pullback moves, however, appear elusive unless they break the 200-DMA support surrounding 1.3460.