- USD/CAD halted its slide as US data showed signs of a further deterioration in the US economy.
- Risk aversion was boosted by a weaker than expected US manufacturing PMI.
- The Fed’s Bowman said the US central bank has work to do.
The USD/CAD pared some of Wednesday’s losses spurred by a weak ISM Manufacturing activity report that threatens to plunge the United States (US) economy into recession. However, dovish comments from Federal Reserve (Fed) Chairman Jerome Powell limited USD/CAD gains. At the time of writing, USD/CAD is trading at 1.3420.
Sentiment turned negative after the US Manufacturing PMI data.
Investor sentiment deteriorated after the Institute for Supply Management (ISM) released its November manufacturing PMI report, which fell into contractionary territory at 49.0, below expectations of 49.2. , and it was below the 50.2 of October. Timothy Fiore, chair of the ISM’s Manufacturing Business Survey Committee, said the report “reflects that companies are preparing for lower production.” In addition, the US Department of Labor (DoL) revealed that initial jobless claims for the past week rose by 225,000, below the 235,000 expected by analysts and below the previous week’s reading.
Earlier, the US Department of Commerce (Doc) revealed that the Fed’s preferred inflation gauge, US core personal consumption spending (PCE), rose 5% year-on-year, below the prior month reading of 5.2%, and in line with consensus.
On the other hand, the president of the US Federal Reserve, Jerome Powell, gave the green light to slow down rate hikes. He asserted that the dovishment could come as early as the December meeting, though he underscored the Fed’s commitment to tackling inflation. Echoing some of his comments, Fed Governor Michell Bowman said: “We still have a lot of work to do to bring our policy rate to a level that is tight enough to bring inflation down over time.”
Aside from this, the Canadian economic calendar, highlighted by the November S&P Global Manufacturing PMI report, remained in contraction territory for the fourth straight month, rising to 49.6 from October’s 48.8. Paul Smith, director of economics at S&P Global Market Intelligence, said: “Both production and new orders continued to fall, although it is perhaps some consolation that the degrees of decline were milder than in October.”
That being said, the daily chart of USD/CAD showed that the major found support around 1.3400, although it failed to break the confluence of the 20 and 50 day EMAs around 1.3440/45. This could pave the way for a break below 1.3400, sending the pair down towards the 100 day EMA at 1.3321. Otherwise, USD/CAD could consolidate around the 1.3400-1.3440 area.
What must be considered
The US and Canadian economic agendas will feature employment figures, which could shed some clues about the current economic situation.
Key USD/CAD Technical Levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
