CAD the Weakest Currency Today As Ivey PMI Dives
USD CAD has been trading in a range, and despite the soft Ivery PMI today, it did not provide a breakout for USD/CAD.
USD CAD has been trading in a range, and despite the soft Ivey PMI today, it did not provide a breakout for USD/CAD. The pair continues to remain in the range with both currencies uncertain of the future rate path from the FED and the Bank of Canada respectively.
USD/CAD Chart H4 – The Triangle Is Getting Narrow
The USD and CAD are experiencing similar trajectories in response to recent economic indicators and central bank actions. Anticipation of rate cuts by the Federal Reserve in September has been fueled by low inflation and employment reports. Derivative markets indicate a 50% likelihood of a rate cut in September.
While there’s anticipation of rate cuts, traders in derivative markets have not yet fully priced in monetary policy easing. Traders are advised to wait for the price to return to resistance levels before considering selling positions, or for the price to come back to support levels before considering buying positions.
The Bank of Canada announced a dovish rate cut, suggesting potential additional rate cuts if inflation continues to decline. Despite the rate cut, overall rate cut expectations have not significantly changed, with the market now expecting 77 basis points of lowering this year compared to 60 basis points prior to the rate decision. Similar to the USD, traders are advised to wait for clear signals before taking positions, either waiting for the price to return to resistance for selling or return to support for buying.
May Canada Ivey PMI Index
Key Points:
- Ivey PMI (Seasonally Adjusted):
- Current: 52.0 points for May
- Prior Month: 63.0 points
- Ivey PMI (Not Seasonally Adjusted):
- Current: 59.1 points for May
- Prior Month: 65.7 points
- Lowest Level: Since August 2023
Recent Bank of Canada Action:
- Rate Cut: The Bank of Canada cut rates by 25 basis points yesterday.
The significant decline in the May Canada Ivey PMI index, coupled with the Bank of Canada’s recent 25 basis point rate cut yesterday, points to concerns about the Canadian economy’s strength. The volatility and the dive in the PMI readings for May underscores the need for careful interpretation, but the broader trend suggests weakening economic activity.
Market participants are keeping an eye on these indicators from Canada as they provide critical insights into the economic outlook and potential future actions by the Bank of Canada. They didn’t commit to further interest rate cuts yesterday, but that’s what traders are thinking. So, the weak Ivey report today is having a negative impact on the Canadian dollar, which remains the weakest among major currencies today, even beating the USD to it.
USD/CAD Live Chart
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