Canadian dollar retreats on stronger US counterpart

The US dollar had a substantial increase in momentum on Monday as risk appetite across the board decreased and uneasy investors piled into the USD. Just below 1.3680, the USD/CAD pair is rounding into the midway of the US trading session.

The Purchasing Managers Index (PMI) for Canadian Manufacturing fell on Monday from 48 to 47.5, further eroding support for the Loonie and supporting an increase in the USD/CAD pair’s price.

Next up for the Canadian dollar on the economic calendar is Thursday’s Ivey PMI for September, which is forecast to decline from 53.5 to 50.8. Risk appetite has soured further on Monday, driving the US Dollar Index (DXY) higher across the entire market.

Concerns over a recession in the Canadian domestic economy are being heightened as markets show little support for the oil-dependent CAD and Canadian PMIs continue to deteriorate. There won’t be anything of note on the economic calendar for CAD traders until Thursday’s Ivey PMI, which is expected to fuel market movements and US data to drive the USD/CAD towards the middle of the week.

On Monday, the USD/CAD pair was trading around 1.3675, increasing the topside run that began from Friday’s lows near 1.3420 by more than 100 pips from the day’s low. In just two trading days, the USD/CAD has increased by more than 1.8%, and as the pair shakes off recent bearish momentum, more gains are expected.