USD/CAD attempts a recovery to near 1.3550 as Fed policy hogs limelight

• USD/CAD has rebounded to near 1.3550 as pre-Fed policy anxiety is supporting US Dollar’s appeal.
• After better-than-anticipated US ISM Manufacturing PMI, an upbeat performance is expected from the US service sector.
• BoC Macklem is expected to guide the likely monetary policy action for further policies.

The USD/CAD pair has attempted a recovery move after defending the crucial support of 1.3530 in the early Asian session. The Loonie asset has rebounded to near 1.3550 and is expected to add gains further as the appeal for the US Dollar is improving ahead of the interest rate decision by the Federal Reserve (Fed).

S&P500 futures are showing some losses in early Asia as investors are expected to go light toward the Fed’s policy decision. The risk profile is showing some caution as investors are worried that hawkish interest rate guidance from the Fed would dent market sentiment dramatically.

Meanwhile, rising odds of one more interest rate hike from the Fed are impacting the demand for US government bonds, which has sent US yields on fire. The 10-year US Treasury yields have jumped to 3.57%.

The US Dollar Index (DXY) is in a sideways auction around two-week old resistance of 102.20. A power-pack action is expected from the USD index amid the release of United States ISM services PMI data. After better-than-anticipated US ISM Manufacturing PMI, an upbeat performance is expected from the service sector.

As per the consensus, ISM Services PMI (April) is seen higher at 53.1 from the former release of 51.2. Also, New Orders Index is expected to jump to 57.0 vs. the prior release of 52.2.

On the Canadian Dollar front, S&P Manufacturing PMI (April) missed estimates after landing at 50.2 vs. the consensus of 50.5. This week, investors will keep the focus on the speech from Bank of Canada (BoC) Governor Tiff Macklem, which is scheduled for Thursday. BoC Macklem is expected to guide the likely monetary policy action for further policies.