USD/CAD gains traction around 1.3640 ahead of the BoC rate decision, US ISM Services PMI

• USD/CAD gains momentum near 1.3640 amid the USD demand.
• US Factory Orders came in at -2.1% MoM versus 2.3% prior and worse than -0.1% expected.
• BoC is anticipated to keep its benchmark interest rate unchanged at 5.00% on Wednesday.
• Market players will closely watch the Bank of Canada (BoC) monetary policy meeting, US ISM Services PMI.

The USD/CAD pair edges higher to 1.3640 after bouncing off the low of 1.3600 during the early Asian session on Wednesday. A higher Treasury yield and cautious mood boost the US Dollar (USD) broadly. Meanwhile, the US Dollar Index (DXY) trades near a nine-month high of around 104.90. Investors await the Bank of Canada (BoC) interest rate decision and markets anticipate an unchanged policy.

The data released by the US Department of Commerce revealed on Tuesday that US Factory Orders for July came in at -2.1% MoM versus 2.3% prior and worse than market expectation of -0.1%. The figure marked the lowest since mid-2020.

Furthermore, Federal Reserve (Fed) Governor Christopher Waller made a hawkish remark by saying that the Fed has more room to raise interest rates. He added that the data will determine if the Fed needs to raise rates again and whether the Fed is done raising rates.

On the Loonie front, The BoC’s interest rate decision is scheduled for Wednesday. According to a Reuters poll, BoC is anticipated to keep its benchmark interest rate unchanged at 5.00% on Wednesday and to keep it there until at least the end of March 2024. Meanwhile, the rally in oil prices might lift the Loonie as Canada is the largest exporter of crude to the US.

About the data last week, Canadian real Gross Domestic Product (GDP) Annualized for the second quarter contracted at 0.2% YoY against the previous reading of 2.6%. The growth number was worse than expected with a 1.2% expansion.

Looking ahead, the BoC interest rate decision and the US ISM Non-Manufacturing PMI will be announced later in the North American session on Wednesday. The figure is expected to rise 52.6. Also, the BoC's Governor Tiff Macklem's speech and the Canadian Unemployment data will be due on Friday. These data could give a clear direction for the USD/CAD pair.