Usdcad drops due to weak Canadian PMI and anticipation of US inflation data

USDCAD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	-1.2%	-170.6 Pips
Week to-date	-0.8%	-114 Pips
April	-1.95%	-280.7 Pips

Upcoming key events (London Time)

Thu 01:30 PM USD CPI Inflation Rate (12-mth)
Fri 01:30 PM USD PPI excluding Food and Energy sectors (12-mth)

What happened lately

In Canada, the Ivey Purchasing Managers Index (PMI) for March, adjusted for seasonal fluctuations, showed a decline to 51.3 from 55.3 recorded in February. This figure indicates a slowdown in the purchasing activities in Canada and suggests a potential weakening in the business climate, as a PMI above 50 generally signifies expansion while a reading below 50 suggests contraction in activity. Despite this contraction in March, a conflicting report noted an increase to 55.6 from 53.6, suggesting some uncertainty or variability in the underlying data sources. The discrepancies in these reports might reflect variations in the sample or the methodology utilized.

In the US, forthcoming economic data releases include the Consumer Price Index (CPI) Inflation Rate, scheduled for Thursday, which is closely watched as a primary gauge of inflation. On Friday, focus will shift to the Producer Price Index (PPI), excluding Food and Energy sectors, both significant indicators of inflationary trends in the US economy.

The USDCAD currency pair, which reflects the value of the US dollar against the Canadian dollar, saw a significant drop of 1.2% to 1.40887 on Wednesday. The decline in the Ivey PMI in Canada could potentially weaken the Canadian dollar as it may reflect a slower economic activity and reduced investor confidence in the Canadian market. Conversely, the impending high-impact economic indicators from the US could exert upward or downward pressure on the pair depending on whether they surpass or fall short of market expectations. A stronger than expected US inflation report could bolster expectations of a tighter monetary policy, supporting the US dollar and potentially narrowing the recent losses against the Canadian dollar. Conversely, weaker inflation data might exert further mitigating effects on USDCAD, possibly exerting additional pressure towards the downside if the Canadian economic outlook remains stable or improves.

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What can we expect from USDCAD today?

USDCAD on Wednesday dropped -1.2% to 1.40887. Price is below 9-Day EMA while Stochastic is falling.

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

Looking ahead for the day, immediate support level is at S1 1.40146 with break below could see further selling pressure towards S2 at 1.39406. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.42735 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.40700 would indicate selling pressure.

For the week to-date, take note that USDCAD is mixed as compared to the prior week.

Key levels to watch out:

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