USD/CAD declines towards 1.3200 as US Dollar extends correction ahead of US Factory PMI

• USD/CAD sees support near 1.3200 amid US Dollar’s correction and rising oil prices.
• US factory activities are expected to contract straight for the ninth month.
• Oil prices soar above $81.00 as investors are seeing global interest rates peaking now.

The USD/CAD pair witnesses selling pressure after failing to sustain above the crucial resistance of 1.3250 in the London session. The Loonie asset attracts offers as the US Dollar Index (DXY) extends correction to near 101.60.

S&P500 futures generate some gains in Europe, portraying an upbeat market mood. US equities were heavily bought on Friday, supported by a rally in technology stocks. The USD Index faces a sell-off amid uncertainty ahead of the United States Manufacturing PMI, which will be announced on Tuesday at 14:00 GMT.

As per the preliminary report, US factory activities landed at 46.5 in July, higher than June’s release of 46.0. In spite of a higher figure, the economic data remained in a contraction phase. A figure below 50.0 is considered a contraction in economic activities. It is worth noting that US factory activities have been consistently contracting for the past eight months due to higher interest rates and tight credit conditions by US regional banks.

Apart from the Manufacturing PMI, investors will focus on forward orders report. The economic data is seen declining to 44.0 vs. the prior release of 45.6. The underperformance of the US Manufacturing PMI would allow the Fed to keep interest rates steady in September monetary policy. Meanwhile, the 10-year US Treasury yields seem sluggish around 3.96%.

On the Canadian Dollar front, investors await labor market data, which will release later this week. According to the estimates, the Canadian economy added 20.6K fresh payrolls in July, lower than the additions of 59.9K recorded in June. The Unemployment Rate is seen rising to 5.5% vs. the former release of 5.4%.

Meanwhile, oil prices soar above $81.00 as investors are seeing global interest rates peaking now. Investors should note that Canada is the leading exporter of oil to the United States and higher oil prices support the Canadian Dollar.