USD/CAD Plunges Below 1.3650 as US Private Labor Demand and Services PMI Disappoint
The USD/CAD pair experienced a sharp decline on Wednesday, falling below the 1.3650 mark as the US Dollar (USD) faced significant selling pressure. This drop was triggered by weaker-than-expected US private labor demand figures and a contraction in the ISM Services PMI, raising concerns about the US economic outlook.
Market Drivers: Weak US Data Fuels Rate Cut Speculation
- ADP Employment Report: The ADP report showed a surprising slowdown in private sector job growth for June, with only 150K new jobs added, missing estimates of 160K and falling short of the revised May figure.
- ISM Services PMI Contraction: The ISM Services PMI unexpectedly fell into contraction territory, dropping to 48.8 in June, well below expectations of 52.5 and the previous month's reading of 53.8. This contraction in the services sector, which accounts for a significant portion of the US economy, has amplified worries about economic growth.
- US Dollar Weakness: The combination of these disappointing data releases has weakened the US Dollar Index (DXY), pushing it down to near 105.30.
- Fed Rate Cut Expectations: The weaker economic data has fueled speculation that the Federal Reserve (Fed) might be more inclined to cut interest rates sooner than previously anticipated.
Canadian Employment Data in Focus
Investors are now eagerly awaiting the release of the Canadian Employment report for June on Friday. The report is expected to show a slight increase in the unemployment rate and a slowdown in job creation. A weaker-than-expected report could further boost expectations of Bank of Canada (BoC) rate cuts.
Technical Analysis: USD/CAD Breaks Down, Support Levels to Watch
The USD/CAD pair has broken down below key support levels, indicating a shift in momentum towards the downside. The next potential support levels to watch include the 1.3600 psychological level and the 200-day Exponential Moving Average (EMA), which could provide some cushion for the pair's decline.
Key Takeaways:
- The USD/CAD pair is plunging as weak US private labor demand and services PMI data raise concerns about the US economic outlook.
- The US Dollar is weakening as expectations of Fed rate cuts increase.
- Canadian employment data on Friday will be a key factor to watch for further direction in the pair.