USD/CAD to Target 1.31 on Positive US Service PMI Numbers

It is a quiet day for the USD/CAD. There are no economic stats from Canada for the markets to consider today. However, while there are no stats from Canada, private sector PMIs from Asia, Europe, and the US will provide direction.

Bearish sentiment toward demand for crude has weighed on crude oil prices and the Loonie.

This morning, the Loonie found much-needed support from Saudi Oil Minister Prince Abdulaziz bin Salman, who reportedly highlighted the disconnect between the futures market and supply.

Better-than-expected manufacturing PMI numbers for the Eurozone were also Loonie price positive.

On the monetary policy front, there are no Bank of Canada speeches scheduled for the markets to consider today that could further influence the Loonie.

USD/CAD Price Action

Ahead of the US session, the USD/CAD was down 0.18% to 1.30290.

By recent standards, a range-bound morning session saw the USD/CAD rise to a high of 1.30631 before falling to a low of 1.30058.

Technical Indicators

The USD/CAD will need to move through the 1.3028 pivot to target the Monday high of 1.30061 and the First Major Resistance Level (R1) at 1.3085.

Better-than-expected US private sector PMIs would support a run at the Second Major Resistance Level (R2) at 1.3118. FOMC member chatter will also need considering as the markets shift focus to the Jackson Hole Symposium.

The Third Major Resistance Level (R3) sits at 1.3208.

However, failure to move through the pivot would bring the First Major Support Level (S1) at 1.2938 into view.

Barring marked pickup in risk appetite, the USD/CAD should steer clear of sub-$1.2950 and the Second Major Support Level (S2) at 1.2938.

The Third Major Support Level (S3) sits at 1.2848.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bullish signal. This morning, the USD/CAD pair stood above the 50-day EMA, currently at 1.29346.

The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA breaking away from the 200-day EMA. Both were bullish signals for the USD/CAD pair.

A USD/CAD hold above the 50-day EMA would support a run at R1 (1.3085) to target resistance at 1.31 and R2 ($1.3118). However, a fall through S1 (1.2995) would bring S2 (1.2938) and the 50-day EMA (1.29346) into view.

The US Session

It is a relatively busy day ahead on the US economic calendar. Prelim private sector PMIs for August will draw interest.

While the ISM survey-based numbers have more influence, today’s services PMI will need to make a move back towards 50 to support the shift in sentiment towards the US economy and Fed monetary policy.

Sub-components, including input and output costs and new orders, would be focal points. Other stats include new home sales figures that should have a muted impact on the dollar, with inventories an ongoing issue.

Following the Dollar Spot Index return to 108, a move to 109 would give the bulls a run at 110.