USD/CAD holds onto recovery move near 1.4000 despite firm dovish Fed bets

USD/CAD grips Monday’s recovery move around 1.4000 following footprints of the US Dollar.
The US ISM Manufacturing PMI fell at a faster-than-expected pace to 48.2 in November.
Investors await US ADP Employment Change, and Canada’ employment data.

Sagar Dua FXStreet

The USD/CAD pair clings to Monday’s recovery move to near 1.4010 during the Asian trading session on Tuesday. The Loonie pair bounced back on Monday as the US Dollar (USD) rebounded despite weak United States (US) ISM Manufacturing Purchasing Managers’ Index (PMI) data for November strengthened the case for another interest rate cut by the Federal Reserve (Fed) this year.

At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades calmly near 99.40. The USD Index recovered on Monday after revisiting the monthly low around 99.00.

The ISM showed that the Manufacturing PMI declined at a faster pace to 48.2. Economists expected the PMI to come in lower a 48.6 from 48.7 in October. This was the ninth straight month when the Manufacturing PMI was expected to come in below 50.0. A figure below 50.0 is considered a contraction in the economic activity.

According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to 3.50%-3.75% in December is 86.5%.

Going forward, the major trigger for the US Dollar will be the ADP Employment Change and the ISM Services PMI data for November, which are scheduled for Wednesday.

Meanwhile, the Canadian Dollar (CAD) is expected to trade on the sidelines as investors await the employment data for November, which will be released on Friday. The labor market data is expected to influence market expectations for the Bank of Canada’s monetary policy outlook.

Economists expect the Canadian Unemployment Rate to have accelerated to 7% from 6.9% in October. The Canadian laborforce is expected to have remained steady.

Economic Indicator

ISM Manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US manufacturing sector. The indicator is obtained from a survey of manufacturing supply executives based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that factory activity is generally declining, which is seen as bearish for USD.

Why it matters to traders?

The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) provides a reliable outlook on the state of the US manufacturing sector. A reading above 50 suggests that the business activity expanded during the survey period and vice versa. PMIs are considered to be leading indicators and could signal a shift in the economic cycle. Stronger-than-expected prints usually have a positive impact on the USD. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are watched closely as they shine a light on the labour market and inflation.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

AUD/USD stuck as the RBA talks tough into a slowdown

The Australian Dollar is going nowhere in a hurry, and the contradiction at its core explains why. The Reserve Bank of Australia keeps dangling the prospect of another hike, yet the economy it governs just expanded 0.3% in the first quarter, a clear step down from the prior pace. A central bank threatening to tighten into a visible slowdown is not a recipe for conviction in either direction, and the tape shows it.

USD/JPY: Japanese Yen coiled at the line, leaning on everyone but Japan

The Yen is doing very little, and that stasis is the whole story. USD/JPY sits glued near 160.00 not because Japan has found new strength, but because two outside forces are fighting to a draw over it: a US rate complex that keeps the dollar bid, and a Ministry of Finance that refuses to let the line break.

Gold declines below $4,500 on stalled US-Iran ceasefire talks, US NFP data looms

Gold price edges lower to near $4,470 during the early Asian session on Friday. The precious metal remains volatile amid ongoing geopolitical turmoil. Traders will closely monitor the developments surrounding the US-Iran peace deal and the US May employment report later on Friday.

DeFi hack losses drop 80% from 2022 peak as security defenses improve — Immunefi

Losses from decentralized finance exploits have fallen by 80% since reaching a record high in 2022, according to a report released by Immunefi. The report, which analyzed exploit-driven losses across major blockchain ecosystems between 2020 and 2025, found that DeFi protocol losses declined from $2.62 billion in 2022 to $534 million in 2024.

Nonfarm payrolls: Testing the limits of Fed policy patience

The upcoming nonfarm payrolls report for May will provide the final update on the US labor market before Kevin Warsh attends his first policy meeting as the new Fed Chair later this month.

Recession on paper: What really moves the Canadian Loonie now?

Statistics Canada handed the headline writers a gift and the analysts a headache. Real GDP shrank 0.1% on an annualized basis in the first quarter, and with the fourth quarter of 2025 revised down to a 1.0% contraction, that is two negative quarters in a row, the textbook definition of a technical recession and Canada's first since the pandemic.