USD/CAD retraces daily rally, inches closer to 1.32 handle

• US Dollar Index reverses direction in the American session.
• Disappointing ISM Manufacturing PMI triggers a USD selloff.
• WTI drops below $57, loses 2% on the day.

The USD/CAD pair climbed to its highest level in more than five weeks at 1.3247 earlier today but started to erase its gains in the last few hours as the Greenback came under renewed selling pressure. As of writing, the pair was still up 0.15% on the day at 1.3210.

ISM PMI drags DXY lower on Thursday

The US Dollar Index (DXY), which advanced to a 26-month high of 98.93 today, reversed its course during the American trading hours after the data published by the Institute for Supply Management showed that the manufacturing sector in the US continued to lose momentum with the headline  Purchasing Managers Index (PMI) coming in at 51.2 in July and missing the market expectation of 52. This data also seems to have a triggered a profit-taking action ahead of tomorrow’s Nonfarm Payrolls data from the US. At the moment, the DXY is flat on the day at 98.60.

On the other hand, the Markit Manufacturing PMI in Canada rose back into the expansion territory above the 50 threshold and surpassed the market expectation of 49.5, helping the Loonie gather strength and cause the pair to push lower.

However, the fact that the barrel of West Texas Intermediate is losing 2% on the day at $56.70 makes it difficult for the commodity-related CAD to find demand and limiting the pair’s downside for the time being.

Technical levels to watch for