Ella 
In early Asian trading on Friday, USD/CAD strengthened and encountered resistance at the 1.3600 mark. USD/CAD is currently trading around 1.3583, up 0.01% on the day. Meanwhile, the U.S. dollar index (DXY) rose above an 11-week high of 104.00. Market participants were awaiting a speech from Federal Reserve Chairman Jerome Powell for fresh impetus.
The Fed may have done enough with its restrictive monetary policy, Philadelphia Fed President Patrick Harker told a Jackson Hole seminar on Thursday. Harker also said the Fed will keep interest rates steady this year, but next year will be determined by future economic data releases. Boston Fed President Susan Collins said more rate hikes are likely. However, it is too early to send a clear signal on the timing of a rate cut. Hawkish comments from Fed officials could boost USD/CAD and be a tailwind for USD/CAD.
On the data front, U.S. durable goods orders recorded a monthly rate of -5.2% in July, higher than the expected -4% but lower than the previous value of 4.4%. This was the largest drop in U.S. durable goods orders since April 2020. Meanwhile, the Chicago Fed National Activity Index rose to 0.12 in July from -0.33 the previous month, and the Kansas City Fed Manufacturing Activity Index rose to 12.0 in August from -20.0 the previous month.
In terms of the Canadian dollar, data released by Statistics Canada on Wednesday showed that retail sales in Canada rose by 0.1% month-on-month in June, better than the expected 0%. Retail sales recorded a monthly rate of -0.8%, which was lower than the consensus forecast of an increase of 0.3%.
Money markets trimmed expectations for a 25 basis point rate hike by the Bank of Canada in September following the release of Canadian retail sales data. Investors were pricing in an 18% chance of a rate hike after the data, compared with 27% previously. Notably, the Bank of Canada raised interest rates by 25 basis points (bps) to 5% in July. Meanwhile, lower oil prices weakened the Canadian dollar as Canada is the largest crude exporter to the United States.
Next, a speech by Federal Reserve Chairman Jerome Powell on Friday will be closely watched. The speech is likely to provide the Fed’s view on the state of the economy and hint at whether inflation is under control or whether further rate hikes are needed to combat it. Traders will look for USD/CAD trading opportunities here.
