The Canadian Dollar (CAD) is trading higher on Wednesday, recouping losses from the previous two sessions. The Loonie benefits from the US Dollar’s selloff triggered by disappointing US services activity data.
US Services PMI Misses Expectations, Easing Fed Fears
The March reading of the US ISM Services PMI fell short of market forecasts, with the Prices Paid sub-index showing a marked slowdown. This has tempered concerns about an overly strong economy that could deter the Federal Reserve (Fed) from easing monetary policy, leading to a decline in both US Treasury yields and the US Dollar.
While the downbeat services figures were partly offset by a stronger-than-anticipated ADP Employment Report, market focus now shifts to Friday’s critical Nonfarm Payrolls release, which could potentially rekindle US Dollar strength.
Geopolitical Tensions and Tightening Supply Boost Oil Prices
Rising geopolitical tensions and concerns over supply constraints have propelled crude oil prices to a new year-to-date (YTD) high. This provides a further boost to the commodity-linked Canadian Dollar.
Technical Outlook: USD/CAD Faces Downward Pressure
The sharp bearish reversal in USD/CAD following the ISM Services PMI release puts sellers in the driver’s seat. Immediate support levels reside at 1.3515, currently under pressure, and then at 1.3475.
Overall, the pair exhibits volatile trading inside a slightly bullish channel. The 1.3515 level protects the channel’s base at 1.3475 and 1.3440. Key resistance lies at 1.3585 and 1.3615.