USD/CAD clings to modest gains above 1.3300 ahead of US PMI data

• USD/CAD is rising modestly after closing flat on Tuesday.
• US Dollar Index consolidates weekly gains near 94.00.
• IHS Markit will release Manufacturing and Services PMI data for the US.

The USD/CAD pair closed virtually unchanged near 1.300 on Tuesday and started to edge higher on Wednesday. As of writing, the pair was up 0.15% on a daily basis at 1.3323.

Focus shifts to US PMI data

In the absence of significant fundamental drivers, the USD’s market valuation remains the primary driver of USD/CAD’s movements.

The US Dollar Index (DXY) gained nearly 0.5% on Tuesday and touched its highest level since late July at 94.25 on Wednesday. However, the upbeat market mood, as reflected decisive gains seen in major European equity indexes, is making it difficult for the DXY to preserve its bullish momentum. 

Ahead of the IHS Markit’s preliminary Manufacturing and Services PMI data for September, the DXY is flat on the day near 94.00. Moreover, FOMC Chairman Jerome Powell is scheduled to testify before Congress at 1400 GMT. On Tuesday, Powell refrained from delivering any comments on the policy outlook during his testimony before the House Financial Services Committee. 

On the other hand, crude oil prices are staying relatively calm on Wednesday, failing to provide a directional clue to USD/CAD. The barrel of West Texas Intermediate (WTI) registered modest gains on Tuesday and was last seen gaining 0.55% on the day at $39.95. Later in the day, the US Energy Information Administration (EIA) will release its weekly Crude Oil Stock Change data.

Technical levels to watch for