USD/CAD faces pressure as Canada PMI improves despite contraction
USD/CAD traded lower at 1.4350, declining 0.2% (28 pips) as Canada's manufacturing PMI improved to 49.8 in December from 49.5 previously, marking the 11th consecutive month below the 50 expansion threshold. While the manufacturing sector remains in contraction territory, the slight improvement and stabilization signs have provided minor support to the Canadian dollar. The persistent weakness in manufacturing highlights ongoing challenges for the Bank of Canada, which may limit CAD appreciation potential. Oil prices holding above $72/barrel have also supported the commodity-linked currency. Technical indicators show USD/CAD testing support at 1.4340, with resistance established at 1.4380. Traders await Friday's Canadian employment data and next week's Bank of Canada meeting for clearer directional cues. Continued manufacturing weakness could cap CAD gains, while any surprise improvement in employment figures might accelerate USD/CAD declines toward 1.4300.
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