USDCAD Fell On US Data, Fed Rate Cut Bets

Fundamental Analysis

* Weak Data: The Canadian dollar has strengthened against the U.S. dollar following the release of disappointing economic data from the U.S. The Institute for Supply Management (ISM) reported that the Manufacturing Purchasing Managers Index (PMI) for September was 47.2, unchanged from the previous month and below the market expectation of 47.5. This marks the sixth consecutive month that the PMI has remained below the 50% threshold. Meanwhile, Federal Reserve Chair Jerome Powell indicated that further interest rate cuts are likely as the economy remains stable, though he warned against making hasty decisions. Atlanta Fed President Raphael Bostic also expressed his openness to a potential half-percentage-point rate cut at the November meeting, depending on upcoming job growth data. Additionally, the rising crude oil price has also contributed to the strength of the Canadian dollar, particularly following the escalation of conflict in the Middle East, where Iran has launched ballistic missiles at Israel.

Technical Analysis

* Technical Breakout: USDCAD was traded lower while currently testing near the support level 1.34600. MACD which illustrate bearish momentum signal with the formation of death cross suggest the pair to likely extend its losses after it breaks below the level.

*Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards the support level 1.33350 after it breach below the level 1.34600. Conversely, a potential reversal is also to be expected and the price could head back towards 1.36150.

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Potential Risks

Looking ahead, the U.S. ADP Employment Change data will be closely watched by the investors, as it is scheduled for release later today. Additionally, several Federal Reserve officials—including Thomas Barkin, Raphael Bostic, Beth Hammack, Alberto Musalem, and Michelle Bowman—are set to give speeches.

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Monitoring

Stay updated on US and Canada data, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.