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• USD/CAD remains under selling pressure near 1.3640 in Thursday’s early Asian session. 
• The US service sector fell into contraction territory in June.
• Higher crude oil prices continue to support the commodity-linked Loonie. 

The USD/CAD pair trades on a softer note around 1.3640 during the early Asian session on Thursday. The softer Greenback after the weaker-than-expected US Services Purchasing Managers Index (PMI) for June has dragged the pair lower. Meanwhile, the USD Index (DXY) accelerates its decline to 105.30 and US yields decline across the board amid the Independence Day holiday on Thursday.

Business activity in the US service sector fell into contraction territory in June. The US ISM Services PMI dropped to 48.8 in June from 53.8 in May, missing the market expectation of 52.5 by a wide margin. In response to the weaker data, the US Dollar (USD) attracts some sellers broadly. 

According to the Federal Open Market Committee (FOMC) meeting on June 11–12,  Federal Reserve (Fed) officials emphasized the data-dependent approach and refrained from committing to interest rate cuts until further observation. Additionally, some policymakers noted the importance of patience before considering rate cuts, while several others stated that it’s necessary to hike again if inflation were to rebound. 

On the Loonie front, the rise of crude oil prices continues to underpin the commodity-linked Canadian Dollar (CAD), as Canada is the major crude oil exporter to the United States. On the downside, manufacturing activity in Canada remained weak in June, with the Canadian S&P Global Manufacturing PMI standing at 49.3 in June. This figure came in weaker than the market estimation of 50.2, the 14th straight month of contraction, and the longest run in records dating back to October 2010.  

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