USDCAD Jumps Above 1.35 Resistance after Higher ISM Services

USDCAD is just trading as a forex pair now after following Oil earlier, and has jumped above 1.35 today, pushing above resistance indicators, as US services activity improves, while Canadian services remain in recession. The USD has received another boost from the economic data today, which is now showing signs of a recession, instead we’re seeing some decent improvement in employment and services.

Oil prices have made solid gains, rising above the $70 mark, which initially strengthened the CAD and pushed USD/CAD down by 50 pips. However, despite a $4 surge in WTI crude today, the CAD is not benefiting, as USD/CAD has risen beyond 1.35, breaking through key resistance levels.

USD/CAD Chart Daily – The 200 SMA Has Been Broken

After testing 1.3472 yesterday, USD/CAD has bounced bullishly, surpassing both 1.35 and the 200-day SMA (purple). This move reinforces expectations of a bullish reversal, with an initial target at 1.36, where the 100-day SMA (red), which acted as resistance in September, comes into play. If breached, the next target would be 1.3650, last month’s high.

Canada Services PMI For September

• Services PMI drops to 46.4 from 47.8, signaling accelerating contraction
• New business falls at fastest clip since December 2020
• Employment declines sharply, most since July 2020
• Inflation pressures ease, but remain elevated
• Firms pin hopes on future rate cuts to boost growth

US ISM Services for September

• US ISM Services PMI (September): 54.9 points vs 51.7 points expected, u[ from 50.5 points in August indicating a strong expansion in the services sector.
• Business Activity Index: Jumped to 59.9 points from 53.3 points, showing stronger activity.
• New Orders: Increased to 59.4 points, the highest since February 2023.
• Employment Index: Fell to 48.1 points (lowest since June), signaling contraction in hiring.
• Prices Paid: Rose to 59.5 points, pointing to rising input costs.
• Supplier Deliveries: Improved to 52.1 points, indicating fewer delays.
• Inventories: Climbed to 58.1 points, suggesting stock increases.
• New Export Orders: Increased to 56.7 points, showing stronger external demand.
• Backlog of Orders: Slightly eased, while Inventory Sentiment slipped.

• Full release

Comments from various industries in the service sector reflect a mixed economic outlook:

• Accommodation & Food Services: Economic stability over the past month, with volatility driven by seasonal factors, though concerns loom over port labor issues in October.
• Agriculture, Forestry, Fishing & Hunting: Flat business conditions in recent months with growth concerns in the near term.
• Construction: Housing construction remains weak due to high interest rates. The recent rate cut is a positive sign, but more reductions are needed to boost sales.
• Finance & Insurance: Declining interest rates have led to a slight rise in home and auto loan applications.
• Health Care & Social Assistance: Supply constraints due to increased back orders from manufacturers.
• Information: Cost-cutting measures and employee reductions due to fewer new projects in the US.
• Professional, Scientific & Technical Services: A wait-and-see approach regarding the economy, with businesses hesitant to plan ahead before the November elections.
• Public Administration: Steady prices with increased fiscal year-end spending.
• Retail Trade: Sales are slowly showing positive year-over-year changes.
• Wholesale Trade: Some slowing of sales as customers delay projects ahead of the presidential election.

September’s data stands out as the strongest since February last year. However, there is a notable caveat concerning the jobs data, as the decline suggests potential downside risks for tomorrow’s NFP report.

USD/CAD Live Chart