USD/CAD Drops as CAD Gains on Strong Factory Sales, Fed Decision Awaited

USD/CAD declined as the Canadian dollar strengthened following robust domestic manufacturing data, with factory sales showing unexpected resilience despite ongoing tariff uncertainties. The loonie's bullish momentum reflects Canada's manufacturing sector outperforming expectations, contrasting with softer US economic indicators. Markets are positioning ahead of Wednesday's Federal Reserve decision, where a 25 basis point rate cut is widely anticipated. The diverging economic performance between the US and Canada supports CAD strength, with Canadian manufacturing demonstrating adaptability to trade challenges. Technical analysis shows USD/CAD testing support near 1.3550, with a break below potentially accelerating losses toward 1.3500. Resistance remains at 1.3620 (50-day moving average). The pair's direction will largely depend on the Fed's forward guidance and any surprises in the dot plot projections, with a dovish tilt likely pressuring USD/CAD further lower.