- USD sell-off forces USD/CAD to reverse its direction in NA session.
- Crude oil extends slide to help pair limit its losses.
- US Dollar Index slumps below 99 after disappointing PMI data.
The USD/CAD pair climbed to its highest level since June 19 at 1.3383 earlier today as the persistent selling pressure surrounding crude oil made it difficult for the commodity-related Loonie to stay resilient against the dollar. However, with the Greenback losing its traction following disappointing macroeconomic data releases in the second half of the day, the pair erased all of its daily gains. After turning flat on the day near 1.3320, the pair edged higher and was last seen trading at 1.335, adding 0.08% on the day.
Is a recession in the US around the corner?
Although the IHS Markit’s Manufacturing PMI came in at 50.3 in August’s final reading and beat the market expectation of 49.9, the Institue for Supply Management’s (ISM) Manufacturing PMI fell to its lowest level in more than three years at 49.1 and revived concerns over a possible recession and raised expectations of the Federal Reserve opting out for an aggressive rate cut in September.
The US Dollar Index, which advanced to its best level in more than two years at 98.37 earlier in the session, made a sharp U-turn on the disappointing ISM data and dropped below the 99 mark. At the moment, the index is down 0.1% on the day at 98.95 and remains on track to snap its four-day winning streak.
Commenting on the dismal PMI reading, “It is no longer simply a matter of “expanding at a slower rate.” We are now talking about outright declines, as the ISM manufacturing index slipped into contraction territory in August for the first time since 2016,” said Wells Fargo analysts.
“More worryingly, the ISM new orders component fell to 47.2, which ties the cycle low set in 2012. In order to find a steeper pace of decline in new orders you need to go back to April 2009, which was during the throes of the recession.”
On the other hand, the IHS Markit’s Manufacturing PMI for Canada fell to 49.1 in August from 50.2 in July to paint a gloomy picture of the sector as well. Additionally, The barrel of West Texas Intermediate pushed lower for the third straight day amid the potential negative impact of a global economic slowdown on the demand outlook and didn’t allow the CAD to preserve its strength. As of writing, the WTI was trading at $53.80, erasing 1.75% on the day.
Technical levels to watch for
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