Canadian Dollar bolstered by US data miss

• Canadian Dollar climbs a third of a percent against Greenback after sour data patch.
• Canada economic data remains thin until Friday’s labor figures.
• US data broadly softens, propping up rate cut hopes.

The Canadian Dollar (CAD) gave a shaky performance on Wednesday. The Loonie was mixed against a basket of major currencies but notably climbed one-third of one percent against the US Dollar (USD) after a raft of data misses from the US. Broad-market rate cut hopes are stepping higher after a sharp drag on US ISM Purchasing Managers Index (PMI) activity figures, and rate markets are pricing in over 70% odds of at least a quarter-point rate trim from the Federal Reserve (Fed) in September.

Canada saw little impact from low-tier trade balance figures on Wednesday. Imports and Exports both declined slightly, leading to a sharper-than-expected contraction in May’s International Merchandise Trade tally. Thursday will bring a notable lull to the action with US markets set to be shuttered for the US Independence Day holiday. Friday will open the floodgates with a fully-stocked US session for the latest US Nonfarm Payrolls (NFP) labor data dump.

Daily digest market movers: Canadian Dollar performance saved by stumbling Greenback

• US ADP Employment Change figures gave their lowest print since January, showing 150K net jobs added in June, below the forecast for 160K and falling back from the previous 157K (revised up from 152K).
• US Initial Jobless Claims for the week ended June 28 also rose faster than expected, coming in at 238K compared to the forecast of 235K and previous 233K. The figure lifted the four-week average to 238.5K from the revised previous figure of 236.25K.
• June’s US ISM PMI activity survey revealed a steepening slowdown in business activity. The survey index dropped sharply to 48.8, the lowest print since June of 2020.
• ISM Services Prices Paid in June declined to 56.3 from 58.1 as industry-level inflation eases.
• Canada’s International Merchandise Trade contracted in May, printing at $-1.93 billion versus the expected recovery to $-1.2 billion from the previous $-1.32 billion (revised down from $-1.05 billion).
• Overall trade activity is slowing in Canada, with May Exports and Imports both declining slightly. Exports fell to $62.45 billion from $64.11 billion, while Imports slid to $64.37 billion from the previous $65.43 billion.
• According to CME’s FedWatch Tool, rate markets are pricing in 72% odds of at least a quarter-point rate trim from the Fed on September 18.

Technical analysis: Wednesday’s Greenback declines a welcome reprieve for CAD bulls

Despite a soft-to-mixed performance, the Canadian Dollar (CAD) found higher ground against the US Dollar and the Japanese Yen (JPY), climbing around one-third of one percent against each. The CAD shed weight against the Australian Dollar (AUD) and the Pound Sterling (GBP), declining one-third of one percent and one-fifth of one percent, respectively.

USD/CAD volatility continues to litter the charts, with the pair declining back into familiar lows near 1.3630. Wednesday’s decline adds to earlier declines after an early week peak just below 1.3760.

A supply zone is baked into the daily chart as candlesticks slump back below the 50-day Exponential Moving Average (EMA) at 1.3677. Buyers will be looking for a chance to re-up on an extended pullback to the 200-day EMA at 1.3588.

USD/CAD hourly chart

USD/CAD daily chart