**USD/CAD Trades Lower as Market Awaits Key U.S. Services Data**
*Original article by FXStreet via Google News.*
The USD/CAD currency pair showed slight declines during Wednesday’s Asian trading session, with the pair edging lower toward the 1.3780 level. This dip in momentum comes ahead of a potentially market-moving event: the release of the U.S. Institute for Supply Management (ISM) Services Purchasing Managers’ Index (PMI) for April. Investors are eyeing this data release for further direction, particularly in terms of its implications for U.S. interest rate expectations and the broader economic outlook.
**Overview**
– The USD/CAD pair is down slightly, trading below the 1.3800 threshold.
– The U.S. dollar is showing mild weakness as traders anticipate the April ISM Services PMI.
– Spotlight remains on U.S. economic indicators and Federal Reserve policy projections.
– Crude oil, a key driver for the Canadian dollar, is trading flat, offering limited support to the loonie.
As of the early Asian session on May 1, 2024, USD/CAD had slipped approximately 0.05%, retesting the 1.3780 support zone. The pair has been caught in a narrow range in recent days, with movement largely driven by U.S. economic data releases and global risk sentiment dynamics.
**Key Market Drivers**
1. **U.S. Economic Data and Federal Reserve Outlook**
– The ISM Services PMI is a key gauge of the U.S. service sector’s economic health. Readings above 50 indicate expansion, while figures below signal contraction.
– The previous reading stood at 51.4. Markets are pricing in a modest improvement, with consensus estimates placing April’s figure around 52.0.
– Softer U.S. macroeconomic data recently, including weaker-than-expected GDP and inflation readings, have led to increased speculation that the Federal Reserve may hold interest rates steady or even initiate cuts later this year.
– Market participants are actively reassessing the Fed’s monetary path, which has direct implications for the dollar. A weaker PMI release could reinforce dovish expectations and apply further downward pressure on the USD.
2. **Canada’s Economic Landscape and BoC Policy**
– On the Canadian side, the economic calendar has been relatively quiet this week, offering little new data to influence the loonie.
– The Bank of Canada (BoC) has maintained a cautious stance regarding rate cuts, with policymakers awaiting sustained inflation progress before shifting policy.
– Canada’s inflation rate as of March stood at 2.9%, still above the BoC’s 2% target, although trending down from 4.3% at the beginning of the year.
– Traders are forecasting a potential rate cut by the BoC by mid-year, but the timing remains uncertain and dependent on upcoming CPI and employment figures.
3. **Crude Oil Prices and Commodity Influence**
– Crude oil, Canada’s largest export, plays a major role in determining the value of the Canadian dollar.
– West Texas Intermediate (WTI) crude is currently trading flat around $81 per barrel, offering limited upward support for the CAD.
– Volatility in the oil market due to geopolitical tensions in the Middle East and the war in Ukraine has kept traders cautious.
– Any further escalation in supply-side threats or weakening global demand could weigh on oil prices and, by extension, the Canadian dollar.
4. **Technical Analysis**
– The USD/CAD pair has been consolidating around the 1.3780 level, with near-term support seen at 1.3750.
– Resistance is likely around the 1.3835 zone, followed by 1.3860.
– Relative Strength Index (RSI) indicators on the 4-hour chart remain neutral, suggesting that neither bulls nor bears currently hold a firm grip.
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