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  • USD/CAD pair staged a modest rebound in early American session.
  • US Dollar Index turned positive on the day above 93.00.
  • Manufacturing Sales in Canada rose less than expected in July.

The USD/CAD pair dropped to a daily low of 1.3132 during the European trading hours but staged a rebound in the early American session. As of writing, the pair was virtually unchanged on a daily basis at 1.3170.

DXY rebounds above 93.00

Despite the upbeat performance of Wall Street’s main indexes on Tuesday, the US Dollar Index (DXY) turned north on Tuesday after the World Trade Organization (WTO) said that the US tariffs on Chinese imports were not justified. At the moment, the DXY is up 0.05% on the day at 93.10.

Earlier in the day, the data from Canada showed that Manufacturing Sales in July rose by 7% and missed the market expectation for an increase of 8.7%. On the other hand, the NY Fed’s Empire State Manufacturing Index in the US improved to 17 in September and beat analysts’ estimate of 6 by a wide margin.

Meanwhile, crude oil continues to trade in the positive territory, helping the commodity-sensitive loonie stay resilient against its major rivals. At the moment, the barrel of West Texas Intermediate is up 0.9% on a daily basis at $37.57.

On Wednesday, the Consumer Price Index (CPI) data will be released from Canada. More importantly, the FOMC will publish its Monetary Policy Statement and announced its Interest Rate Decision. 

Previewing the Fed event, “we no longer expect yield curve control to be a Fed policy tool,” said UOB Group’s Lee Sue Ann. “Following the announcement for the adoption of Average Inflation Targeting (AIT) and putting emphasis on “broad and inclusive” employment, the Fed is now seen as willing to allow inflation to run hotter than normal (i.e. 2%) in order to support the labor market and broader economy, a landmark shift to prolonged low rates era.”

Technical levels to watch for