Canadian Dollar extends declines against Greenback on softer PMI data, weaker Crude Oil

• Canadian Dollar falls back as broader markets reverse into Greenback bids.
• Canada economic data continues to slump, Manufacturing PMI flubs expectations.
• Crude Oil continues to slip, dragging down the Loonie.

The Canadian Dollar (CAD) continues to ease back as the 2024 trading year gets underway, extending near-term declines against the US Dollar (USD) to fall a full percentage point as the first trading week of the new year gets underway.

The Canadian S&P Global Manufacturing Purchasing Managers’ Index (PMI) accelerated declines on Tuesday to print at a 43-month low as the Canadian economic outlook continues to deteriorate. The US Manufacturing PMI component also printed below expectations, keeping market risk appetite pinned on the low side and propping up the US Dollar on risk aversion.

Daily digest market movers: Crude Oil, risk aversion bite down on the Canadian Dollar as data misses the mark

• The Canadian Dollar is slipping back against the US Dollar as markets bid up the safe haven Greenback.
• The Canadian Manufacturing PMI printed a multi-year low of 45.4 in December, declining from November’s 47.7.
• The US Manufacturing PMI for December also missed the mark on Tuesday, printing at a four-month low of 47.9. The US PMI missed the market’s expectation of a steady reading from November’s 48.2.
• US Construction Spending also slumped in November, growing by a scant 0.4% versus the market forecast of 0.5%, though October’s MoM Construction Spending print saw a steep late revision from 0.6% to 1.2%.
• Markets have begun to walk back their previous sky-high bets of Federal Reserve (Fed) rate cuts through 2024, with money markets pricing in a median of 150 basis points of rate cuts by year-end.
• US data features heavily on the economic calendar this week, with 2024’s inaugural trading week rounding out the action with Friday’s US Nonfarm Payrolls (NFP).
• Wednesday brings US ISM Manufacturing PMI figures for December, forecast to tick upwards from 46.7 to 47.1, to be closely followed by the Fed’s Meeting Minutes from the latest Open Market Committee meeting.
• Thursday sees the US ADP Employment Change for December, forecast to rise from 103K to 115K, but the recently-inconsistent ADP preview is unlikely to match Friday’s NFP print.
• Friday sees December’s Canadian Unemployment Rate and annualized Canadian Average Hourly Wages, with Canadian unemployment expected to tick higher from 5.8% to 5.9% in December.
• Canadian Friday data can be expected to get overshadowed by US NFP figures, which are forecast to rebound from November’s 199K print to 168K in December.

Technical Analysis: Canadian Dollar slips back from multi-month highs in early 2024

The Canadian Dollar (CAD) has shed around a full percent from Tuesday’s peak bids against the US Dollar, easing back from a 21-week peak and sending the USD/CAD pair rebounding from last week’s lows just below 1.3200.

The USD/CAD has climbed back over the 200-hour Simple Moving Average (SMA) for the first time since mid-December when the pair declined over 3% peak-to-trough from the 1.3600 region.

Despite a near-term rebound in the Greenback, the USD/CAD remains firmly planted in bear country with price action well below the 200-day SMA near the 1.3500 major handle, but the technical outlook favors bidders heading into the new trading year. Technical indicators are pinned firmly into oversold conditions, with both the Relative Strength Index (RSI) and the Moving Average Convergence-Divergence (MCAD) signaling ripe buying conditions as the indicators roll over.
 

USD/CAD Hourly Chart

USD/CAD Daily Chart