The Canadian Dollar (CAD) declined against the US Dollar (USD) on Thursday due to a resurgence of risk aversion in the market, triggered by a misprint in US Purchasing Managers Index (PMI) figures that raised concerns about a potential recession. Investors shifted away from riskier assets towards safe-haven assets like the Greenback, leading to a weakening of the CAD.

Market Focus:

With limited Canadian economic data releases expected until next week, market participants are now eagerly awaiting Friday’s US Nonfarm Payrolls (NFP) report. The current market sentiment is characterized by a delicate balance between hopes for a rate-cutting cycle by the Federal Reserve (Fed) and concerns about a broader economic slowdown that could render such cuts ineffective.

Key Market Movers:

• Canadian and US PMIs: Both Canadian and US Manufacturing PMIs fell in July, indicating a slowdown in manufacturing activity in both countries.
• US ISM Manufacturing Prices Paid: This indicator rose in July, signaling persistent inflationary pressures at the input level.
• US Initial Jobless Claims: The number of Americans filing for unemployment benefits increased more than expected, further raising concerns about the US labor market.

Technical Analysis:

The Canadian Dollar is broadly lower on Thursday, with losses against the US Dollar and the Japanese Yen. The USD/CAD pair is testing the 1.3850 region after a mid-week dip, with continued bullish pressure potentially leading to a challenge of last October’s swing high near 1.3900.