USD/CAD slips to near 1.3700 as focus shifts to US PCE and Michigan CSI data

• USD/CAD has surrendered the immediate support of 1.3700 as the DXY has eased off its intraday gains.
• The impact of US PCE is expected to remain weak as the market has already reacted to standard CPI data.
• Along with the weaker DXY, Canadian dollar is also fragile, which is supporting the asset on a broader basis.

The USD/CAD pair has witnessed a mild correction after hitting a day’s high of around 1.3724 in the early European session. On a broader note, the asset is displaying topsy-turvy moves in a 1.3656-1.3756 range after a pullback move from 1.3600. The asset has not reached much, like the other pairs, to the sheer weakness in the US dollar index (DXY), which indicates that the Canadian dollar is extremely fragile.

Meanwhile, the US dollar index (DXY) has surrendered the critical support of 112.00 and is declining sharply to test the intraday low at 111.73. The DXY is declining despite the higher consensus for the US Personal Consumption Expenditure (PCE) price index data.

As per the estimates, the headline PCE inflation will advance to 6.6% from the prior release of 6.3%, despite a sheer decline in gasoline prices. Also, the core PCE is seen higher at 4.7% vs. the prior release of 4.6%. That could be the case of rising interest rates’ consequences as corporate is passing on the impact of a higher cost of capital to the final consumers.

The impact of PCE data is expected to remain weak as the market participants have already reacted to September’s Consumer Price Index (CPI) data, therefore its impact seems less reactive.

Apart from that, the US Michigan Consumer Sentiment Index (CSI) data will be of utmost importance. The sentiment data is seen as stable at 58.5.

On the loonie front, upbeat monthly Gross Domestic Product (GDP) data has failed to support the loonie bulls. The Canadian economy has grown by 0.1% vs. the de-growth of 0.1%.