Usd/cad falls as Canada’s pmi signals manufacturing contraction

USDCAD Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	-0.39%	-53.5 Pips
Week to-date	-0.35%	-48.9 Pips
May	-0.2%	-27 Pips

Upcoming key events (London Time)

Wed 07:00 PM USD Fed Interest Rate Decision (Federal Funds Rate)

What happened lately

In Canada, the Ivey Purchasing Managers Index (PMI), which serves as an indicator of economic health in the manufacturing sector, experienced a decline in April. The unsmoothed index fell to 52.3 from 55.6 in March, signaling a deceleration in the growth of the manufacturing sector. When seasonally adjusted, the PMI dropped to 47.9 from 51.3, indicating a contraction in the sector. This decline highlights growing concerns over the Canadian economy’s manufacturing health. A PMI reading below 50 points to a contraction while above 50 indicates expansion. Hence, the current readings suggest that the sector is facing headwinds and that there may not be immediate improvements in economic activity within the manufacturing realm in Canada.

Considering the USDCAD exchange rate, which saw a 0.39% drop to 1.37670, the data from Canada suggests potential pressure on the Canadian dollar. The contraction in the manufacturing sector could evoke bearish sentiment towards the CAD, unless counteracted by other economic variables or narratives. USDCAD movement will be heavily influenced by the upcoming US Federal Reserve’s interest rate decision. Should the Fed decide to alter interest rates or signal future monetary policy adjustments, it could lead to increased volatility in the USDCAD pair. A rate hike typically strengthens the USD, which could lead to an upward movement in the USDCAD rate. Conversely, if the Fed maintains rates or hints at dovish future policies, the USD might weaken against the CAD, depending on relative economic conditions between the US and Canada.

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What can we expect from USDCAD today?

USDCAD on Tuesday dropped -0.39% to 1.37670. Price is below 9-Day EMA while Stochastic is falling.

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

Looking ahead for the day, immediate support level is at S1 1.3727 with break below could see further selling pressure towards S2 at 1.36869. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.38451 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.37460 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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