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• USD/CAD surges to near 1.3550 as the Canadian Dollar weakens ahead of the BoC policy meeting.
• The US Dollar surrenders its intraday gains with US NFP in focus.
• The US ISM Manufacturing PMI contracted again in August.

The USD/CAD pair climbs to near 1.3550 in Tuesday’s North American session. The Loonie asset gains sharply as the Canadian Dollar (CAD) weakens amid uncertainty ahead of the Bank of Canada’s (BoC) monetary policy meeting, which will be announced on Wednesday.

Investors see the BoC reducing interest rates again by 25 basis points (bps) 4.25%. This would be the third straight interest rate cut in a row due to easing price pressures, economic slowdown, and downside risks to the labor market.

The US Dollar (USD) gives up its intraday gains with investors focusing on the United States (US) Nonfarm Payrolls (NFP) data for August, releasing on Friday, which will influence market speculation for Federal Reserve (Fed) interest rate cuts.

Meanwhile, the US ISM has reported weaker-than-expected Manufacturing PMI data for August. The report showed that activities contracted at a slower pace, with PMI coming in at 47.2, lower than estimates of 47.5 but higher than the former release of 46.8.

USD/CAD rebounds sharply after a V-shape recovery from a fresh five-month low of 1.3440 on a daily timeframe. The asset is expected to extend its recovery to near the horizontal resistance plotted from May 15 low of 1.3590, which used to be a key support for the US Dollar bulls.

The declining 20-day Exponential Moving Average (EMA) near 1.3590 suggests that the near-term trend is bearish. The 14-day Relative Strength Index (RSI) rebounds sharply after turning oversold near 22.50. The movement suggests that the bearish momentum has ended for now, however, the overall trend is still bearish.

Further pullback May 15 low of 1.3590 will likely be a selling opportunity for market participants, which would drag the asset towards April 5 low of 1.3540, followed by the psychological support of 1.3500.

On the flip side, an upside recovery above August 21 high of 1.3626 would drive the asset towards 19 August high of 1.3687 and August 15 high of 1.3738.

USD/CAD daily chart
 

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