The Canadian dollar continues to drift this week. In the North American session, USD/CAD is trading at 1.3188 up 0.09% on the day.
Canada and the US show positive manufacturing data
After sustaining sharp contraction in the second quarter, manufacturing in the US and Canada is on the mend, which is good news for both economies. Canada Manufacturing Sales posted gains for a third successive month. The indicator came in at 7.0% in July, down from 20.7% and below the forecast of 8.8%. Nevertheless, the healthy gain points to ongoing expansion in the manufacturing sector. There was also positive news south of the border, as the Empire State Manufacturing Index rose to 17.2 in September, up sharply from 3.7 beforehand. The forecast stood at 6.2 points.
Federal Reserve expected to sound dovish
Investors will be glued to the Federal Reserve on Wednesday, as the US central bank makes its rate announcement. It’s a virtual certainty that Fed will leave the benchmark rate close to zero, where they have been pegged since March. In late August, Fed Chair Powell said that the Fed would allow inflation to reach above the two percent threshold before raising rates. This marked a major policy change by the Fed and could well mean that that interest rates will not rise for years to come. A survey taken by CNBC on Tuesday found that respondents don’t expect a rate hike prior to 2023.
- There is resistance at 1.3199, just below the 1.32 level. This is immediately followed by resistance at 1.3220
- 1.3155 is the first line of support. Below, there is support at 1.3132
- The 20-day MA remains under pressure from USD/CAD. If the pair breaks below this line, it would be an indication of a downward trend
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