The USD/CAD pair continues to trade on a softer note around 1.3640 during the early Asian session on Thursday. The decline in the pair is attributed to the weaker-than-expected US Services Purchasing Managers Index (PMI) for June, which has led to a softer Greenback. The US ISM Services PMI dropped to 48.8 in June from 53.8 in May, indicating a contraction in business activity in the US service sector [534d1fc6].
On the other hand, the rise in crude oil prices continues to support the commodity-linked Canadian Dollar (CAD), as Canada is a major crude oil exporter to the United States. Manufacturing activity in Canada remained weak in June, with the Canadian S&P Global Manufacturing PMI standing at 49.3 [534d1fc6].
The key factors driving the Canadian Dollar (CAD) include the level of interest rates set by the Bank of Canada (BoC), the price of oil (Canada's largest export), the health of the Canadian economy, inflation, and the Trade Balance. The Bank of Canada (BoC) has a significant influence on the Canadian Dollar through its interest rate decisions. Higher inflation tends to lead central banks to raise interest rates, attracting more capital inflows from global investors seeking profitable investment opportunities. Macroeconomic data releases also play a role in shaping the value of the Canadian Dollar as they provide insights into the health of the economy [534d1fc6].
The USD/CAD outlook is bearish as the Canadian dollar rallies against a weak US dollar. US service sector business activity plunged to a 4-year low in June. Private employment in the US fell in June. Canada’s trade deficit in May was bigger than expected at C$1.93 billion. The Fed is likely to cut rates in September. The USD/CAD price has broken below the 1.3640 key support level. The decline might pause and reverse to retest the channel resistance. The decline could continue past the support level if bears are still strong [357ebe7d].
The USD/CAD pair appears to be fragile near monthly low around 1.3620 in Thursday’s European session. The Loonie asset weakens as the US Dollar (USD) faces significant selling pressure after the (US) ADP Employment Change data for June showed that the strength in the labor market eases and the ISM Services PMI, in the same period, indicated that the economy outlook has become uncertain. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, declines to near 105.30. The ADP Employment report showed that labor demand in the private sector unexpectedly decline. Number of individuals hired in private sector were 150K, lower than expectations of 160K and the prior release of 157K. The ISM Services PMI, a measure to activities in service sector that accounts for two-thirds of the economy, recorded at lowest in four years. Going forward, the US Dollar and the (CAD) will dance to the tunes of the official Employment data for June, which will be published on Friday. USD/CAD extends its losing streak for the third trading session on Thursday. The Loonie asset falls into the bearish trajectory after a breakdown of the Symmetrical Triangle formation on a daily timeframe. The above-mentioned chart pattern indicates a sharp volatility contraction and a downside break in the same results in wider bearish ticks and heavy selling volume. The major shifts below the 50-day Exponential Moving Average near 1.3676, suggesting that the near-term trend is bearish. The 14-day Relative Strength Index (RSI) has declined to near 40.00. A decisive break below 60.00 levels would push momentum on the downside. A decisive breakdown below May 3 low around 1.3600 will expose the asset to April 9 low around 1.3547 and the psychological support of 1.3500. On the flip side, a fresh buying opportunity would emerge if the asset breaks above June 11 high near 1.3800. This would drive the asset towards April 17 high at 1.3838, followed by 1 November 2023 high at 1.3900.