Usdcad drops as U.S. manufacturing orders decline signals economic cooling

USDCAD Analysis

Performance after Monday
Period	Pct	Chg	Momentum
Monday	-0.67%	-97 Pips
Week to-date	-0.55%	-78.7 Pips
January	-0.14%	-19.8 Pips

Upcoming key events (London Time)

Wed 07:00 PM USD FOMC Meeting Minutes

What happened lately

In November, the U.S. experienced a decrease in new orders for manufactured goods by 0.4%, as reported by the Census Bureau. This follows a revision of October’s data, where the increase was adjusted from 0.2% to 0.5%. The dip in manufacturing orders suggests a cooling in the manufacturing sector, which may signal weakening economic activity as businesses potentially cut back on inventory amid uncertainty or anticipated downturns. This decline is noteworthy as manufacturing is a significant component of the U.S. economy, representing industrial health and future business performance.

The reported contraction in manufacturing orders can affect currency markets, specifically the USD, as it may indicate a slowdown in economic growth, possibly prompting concerns or anticipations regarding central bank actions or broader economic policy. Investors might interpret this as a sign of lower future output and, consequently, alter their demand for U.S. dollars.

The impact on USDCAD, given the decline in U.S. manufacturing orders reflected by the weakening USD, could likely exacerbate the downward movement in the currency pair observed on Monday, where USDCAD dropped by 0.67% to 1.43300. A weaker USD tends to strengthen the CAD relative to it, assuming other conditions remain stable. As the U.S. faces a potential deceleration in economic activity, investors may shy away from the USD, increasing the CAD’s attractiveness, particularly if Canada’s economic indicators present a contrastingly robust picture.

Moreover, the upcoming USD FOMC Meeting Minutes scheduled for release could provide additional insights into monetary policy directions, potentially influencing market sentiment around the U.S. economic trajectory. Market participants will be keenly observing these minutes for any shifts in tone or outlook that might affect the economic landscape and future currency valuations. Therefore, USDCAD’s path will be influenced by both the current U.S. economic data and forthcoming policy signals from the Federal Reserve, demanding close attention from traders operating in the forex market.

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What can we expect from USDCAD today?

USDCAD on Monday dropped -0.67% to 1.43300. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for USDCAD looks bearish as the pair posted lower in Monday trading session.

Looking ahead for the day, immediate support level is at S1 1.42557 with break below could see further selling pressure towards S2 at 1.41813. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.44450 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.42760 would indicate selling pressure.

For the week to-date, take note that USDCAD is bearish as the pair posted lower by -0.55%.

Key levels to watch out:

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