USD/CAD drops to four-day lows, moves away from weekly tops
- Canadian Dollar trims losses against US dollar as equity prices continue to drop worldwide.
- Emerging market currencies tumbled but AUD, CAD and NZD managed to rise over the last hours.
- Mixed US data about service sector: Markit rises above expectations while ISM drops to lowest since August 2016.
The USD/CAD pair peaked earlier today above 1.3240 and then turned to the downside. Recently bottomed at 1.3176, the lowest since July 31. As of writing, it is hovering slightly below 1.3200, flat for the day.
Dollar losses strength against G10 currencies
Emerging market currencies are falling sharply on the back of risk aversion triggered by trade war tensions. The devaluation of the Chinese yuan increased fears and concerns about the global economic outlook amid an escalation in the US-China trade tensions.
The USD/CAD rose at the beginning of the week but then turned lower as US yields tumble with the 10-year reaching 1.75%, the lowest since November 2016.
Data from the US did not help the greenback. The positive Markit Service PMI for July (53.0 vs expectations of 52.2) was offset by the ISM non-manufacturing index that dropped to 53.7, its lowest level in almost three years. “Although still above 50, there were signs that global growth and trade headwinds are extending beyond the factory sector”, said Well Fargo analysts.
Still, the key driver across market continues to be the US-China situation. In Wall Street, the DOW JONES is down more than 2% while the NASDAQ losses almost 3%. Risk aversion so far is not boosting the USD/CAD that continues to move with a bearish bias in the very short-term.
Bearish intraday tone still in range
The USD/CAD is attempting to consolidate below 1.3200. The next key support is 1.3180/85, also the lower limit of the current range. A break lower would favor an extension of the correction from 1-month highs.
If the pair recovers clearly back above 1.3200 it would alleviate the bearish pressure. The next resistance is seen at 1.3220 and above comes 1.3250, the critical resistance that capped the rally last week.
More levels