"The Canadian economy has been well-insulated from the U.S. slowdown and most of the data that has come out has surprised on the upside, so you can't rule that out for tomorrow's data," said Matt Perrie, foreign exchange analyst at BMO Capital markets.

Indeed, in the United States the Institute for Supply Management's manufacturing index surprised to the upside by coming in at 48.6, unchanged from March's reading but above the consensus 48.0 level, while the non-manufacturing index blew through the consensus of 49.1 and the previous readings of 49.6, reaching a level of 52.0.

Stewart Hall, an analyst at HSBC Securities Canada, said a downward move remains more likely. "History provides a decent road map to the future direction for the Ivey number set. In the month of April, readings on the headline purchaser index typically circulate in the mid to high 50's," he said.

"In March, the usual seasonal patterns gave way with the 59.0 reading on the headline coming in well below what had historically been the case (mid to high 60s)," he continued. "On that basis, there is reason to believe that the headline purchaser index for the April Ivey may print to the downside of expectations and historical patterns."

Market participants will also be paying attention to the inventories, supplier deliveries, employment and prices indexes. In March, the inventories index declined to 50.7 from 59.2, while supplier deliveries pulled back to 43.3 from 44.9. The employment index rose to 53.9 from 53.6 and the prices index fell to 68.7 from 74.3.

Foreign exchange traders will also be paying close attention to the report's impact on the Canadian dollar given the report's historically strong impact on the currency. However, with the Canadian dollar trading fairly range-bound over the last several weeks, within the 0.9688 and 1.009 marks against the US dollar, and the upcoming release of Canadian employment figures, FX traders are unconvinced the report will break the recent trading range.

Tyson Wright, a trader at Custom House, said he doesn't expect a lot of big moves in the USD/CAD on Tuesday's Ivey PMI data. "There is a lot of resistance in the 1.02 -1.025 (CAD) range. And I don't think it's going to break through any time soon," he said. "There is this tug of war that is going on between commodity prices and the data. Last week we had oil drop to $110 but now it is back up to $120 and that is helping the Canadian dollar."

"I think it will take a more than just weak Ivey data to for the U.S. dollar break out of the range," he added.

Nevertheless, currency strategists said Friday's Canadian employment report would probably drive more permanent move in the Canadian dollar. "I suspect that an as-expected decline in the Ivey PMI would likely result in a modest reaction in the CAD as traders await the employment and trade report at week's end," said Ryan Brecht, an economist from Action Economics.

"Moreover, the decline in the Ivey that we project would be consistent with the usual seasonal trend and leave the index in still expansionary territory," he said.

By Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it