Canadian Dollar slumps further as markets pile into Greenback

• Canadian Dollar hits eight-week low after US PMI surge.
• Canada sees BoC Governor Macklem slated for Tuesday.
• US Fed policymaker statements weigh on Monday markets.

The Canadian Dollar (CAD) is broadly lower on Monday after a broad market dogpile into the US Dollar (USD) after US ISM Services Purchasing Managers Index (PMI) figures came in well above expectations. Additionally, mixed comments from US Federal Reserve (Fed) policymakers risk investor outlooks, hampering risk appetite.

Bank of Canada (BoC) Governor Tiff Macklem is slated to speak and answer questions regarding monetary policy transmission in Quebec on Tuesday, leaving the Canadian Dollar absent meaningful domestic releases on Monday.

Daily digest market movers: Canadian Dollar backslides as markets readjust expectations

• US data, Fedspeak dominates currency flows on Monday with Canada absent on the economic calendar.
• The US ISM Services PMI for January climbed to 53.4 versus the forecast of 52.0, accelerating above the previous month’s 50.5, which saw only minor revisions.
• US ISM Services Prices Paid hit an 11-month high as businesses continue to see inflationary pressure in January, up sharply from December’s 56.7 (revised down from 57.4).
• US ISM Services New Orders Index rebounds to 55 in January from December’s 52.8 as economic activity continues to stubbornly vex markets, which hope for earlier rate cuts.
• Minneapolis Fed President Neel Kashkari noted on Monday that higher neutral rates might mean that monetary policy may not be as tight as previously thought.
• Fed’s Kashkari also noted that despite broadly positive US data, some weak points remain, notably rising consumer delinquencies.
• Chicago Fed President Austan Goolsbee pulled up short of Fed Kashkari’s earlier statements, noting that while he needs to see more inflation progress in the data itself, he won’t rule out a March rate cut entirely.
• The CME’s FedWatch Tool sees money markets pricing in barely a 15% chance of a rate cut in March.

Technical analysis: Canadian Dollar softens across the board, USD/CAD tests eight-week highs

The Canadian Dollar (CAD) sees broad losses on Monday as the Loonie sheds weight against nearly all of its major currency peers in the new trading week. The CAD is sharply lower against the US Dollar, down half a percent on Monday, with the CAD shedding a third of a percent against the Japanese Yen (JPY) and a quarter of a percent against the New Zealand Dollar (NZD). Despite broad selling pressure, the CAD still gained a quarter of a percent against the Pound Sterling (GBP), Monday’s weakest-performing currency, forcing the Canadian Dollar to settle for second-worst.

The Canadian Dollar’s declines on Monday sees the USD/CAD testing back over the 1.3500 handle, running into near-term technical resistance at familiar intraday swing highs near 1.3540.

Monday’s USD/CAD surge sees the pair trading back into the high end of the 200-day Simple Moving Average (SMA) below the 1.3500 handle, and the pair is pushing into eight-week highs with an immediate technical ceiling weighing down from 1.3600.

USD/CAD hourly chart

USD/CAD daily chart