July's core Consumer Price Index in Canada accelerated from 2.6% to 2.7% year-over-year, driving the median rate higher from 3.0% to 3.1%. The headline figure remained unchanged at 1.9%, bolstering the Canadian dollar as the Bank of Canada is now more likely to keep the policy rate steady at 2.75% during its July 30 meeting. Additional support comes from a robust increase in June building permits to 283.7K—well above the 259.0K forecast.
US Dollar Pressured by Powell's Uncertain Tenure
The US dollar remains under pressure after speculation surfaced regarding a potential early exit for Federal Reserve Chairman Jerome Powell. Prediction markets (Polymarket) now assign a 20.0% probability to Powell stepping down in 2025. Several Congressional Republicans are reportedly preparing to file a criminal referral to the Department of Justice, citing alleged misuse of $2.5B in federal funds for Fed headquarters renovations. While the White House denies any plans to oust Powell, recent developments signal the Fed chair faces growing political scrutiny.
Should Powell leave office prematurely, the dollar risks hitting new yearly lows near 95.98 as markets confront policy uncertainty. A dovish successor could fuel inflation fears, whereas prolonged high rates (currently 4.50%) could stall the economic recovery.
Technical Outlook: Support and Resistance
The long-term trend for USD CAD remains bearish, despite July’s corrective test of resistance at 1.3755—an ideal level for fresh short positions targeting the monthly low at 1.3554.
In the medium term, price action reversed after touching the 1.3755–1.3816 resistance zone, moving down to 1.3678 and further to the 1.3557–1.3534 region. Currently, the pair is trading within the 1.3816–1.3534 channel. Near the upper boundary, sellers may look to target 1.3540.
- Resistance Levels: 1.3755, 1.3850, 1.4000
- Support Levels: 1.3554, 1.3440, 1.3378
Trade Setups
- Sell scenario: Consider shorts from 1.3755, targeting 1.3650. Stop-loss: 1.3805. Time horizon: 9–12 days.
- Buy scenario: Longs may be opened above 1.3805, targeting 1.3905. Stop-loss: 1.3755.
Key Levels for Weekly Trading
- 1.3378
- 1.3440
- 1.3554
- 1.3755
- 1.3850
- 1.4000
USD/CAD — Canadian inflation and Fed outlook