USD/CAD declines towards 1.2850 as DXY turns fragile ahead of US ISM Services PMI

The USD/CAD pair is likely to turn sideways after a perpendicular downside move from near 1.2900 in the Asian session. The downside pressure will remain favored and the asset may drag further towards 1.2850 as investors have shrugged off the negative market sentiment. Earlier, investors shifted their liquidity to the US dollar index (DXY) on escalating geopolitical tensions between the US and China.

So far, it’s calm on the military front, however, Russian naval ships have joined Chinese ships near the Taiwanese disputed island. The risk sentiment will continue to remain on tenterhooks as an occurrence of military action on the visit of US House Speaker Nancy Pelosi will escalate tensions further.

The DXY has tumbled to the edge of 106.00 after a super-bullish Tuesday as investors are shifting their focus towards the US Institute of Supply Management (ISM) Services PMI data. A preliminary estimate for the economic data is 53.5, significantly lower than the prior release of 55.3. The US ISM Services New Orders Index data will be worth watching as US techs have lowered their guidance for the rest of the year.

On the loonie front, investors are awaiting the release of the employment data. The Net Change in Employment is seen at 20k, while the economy showed a jobless situation in June by 43.2k. However, the Unemployment Rate may increase to 5% from the prior release of 4.9%.

Meanwhile, oil prices have resumed their downside move after a pullback towards $94.00 in the Asian session.  The oil prices are expected to display more losses ahead of the OPEC meeting as the oil cartel is expected to promise additional oil in the global supply.