USD/CAD consolidates above 1.3500 ahead of highly-anticipated Jackson Hole Symposium

• USD/CAD oscillates in a narrow band and is influenced by a combination of diverging forces.
• A softer USD acts as a headwind; weaker Oil prices undermine the Loonie and lend support.
• Traders seem reluctant ahead of Fed Chair Powell's speech at the Jackson Hole Symposium.

The USD/CAD pair struggles to gain any meaningful traction on Thursday, albeit manages to hold above the 1.3500 psychological mark during the Asian session. The mixed fundamental backdrop, meanwhile, warrants caution before positioning for an extension of the previous day's rejection slide from the 1.3600 mark, or the highest level since May 31.

The US Dollar (USD) continues to be weighed down by the disappointing release of the flash US PMI prints on Wednesday, which showed that business activity approached the stagnation point in August. In fact, the S&P Global's Composite US PMI fell to 50.4 in August from the 52 previous, registering the biggest drop since November 2022. This, along with a further decline in the US Treasury bond yields, is seen exerting some pressure on the Greenback and the USD/CAD pair.

The pullback in the USD Index (DXY), which tracks the Greenback against a basket of currencies, from over a two-month high, meanwhile, seems limited ahead of a speech by Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium. Investors will closely scrutinise Powell's comments for fresh cues about the Fed's future rate-hike path, which will play a key role in driving the USD demand in the near term and provide a fresh directional impetus to the USD/CAD pair.

In the meantime, the weaker-than-expected Canadian Retail Sales figures released the previous day, along with softer Crude Oil prices, could undermine the commodity-linked Loonie and lend some support to spot prices. In fact, Oil prices languish near a one-month low amid concerns that a deeper global economic downturn will dent fuel demand. The fears resurfaced a host of manufacturing surveys painted a grim picture of the health of economies across the globe.

Hence, a strong follow-through selling is needed to confirm that the recent move-up witnessed since the beginning of this month has run its course and the USD/CAD pair has topped out near the 1.3600 mark. Market participants now look to the US economic docket, featuring the usual Weekly Initial Jobless Claims and Durable Goods Orders data. This, along with speeches by influential FOMC members, will influence the USD and provide some impetus to the USD/CAD pair.

Technical levels to watch