Forex Market: USD/CAD daily forecast

During yesterday’s trading session USD/CAD traded within the range of 1.0891-1.0922 and closed at 1.0918.

At 11:14 GMT today USD/CAD was gaining 0.19% for the day to trade at 1.0929. The pair touched a daily high at 1.0942 at 6:20 GMT, breaching the first two key resistances.

Fundamental view

United States

Employment in United States’ private sector probably increased by 208 000 during May, following another job gain of 220 000 in the previous month. The report by Automatic Data Processing Inc. (ADP) is based on data, encompassing about 400 000 out of 500 000 business entities with over 24 million employees engaged in 19 major sectors of the economy in accordance with North American Industry Classification System (NAICS). It usually comes out two days before the official employment report by the Bureau of Labor Statistics (BLS), thus, providing clues over the tendency in nation’s non-farming sector. In case employment increases more than anticipated, this would have a bullish effect on the greenback. The report is expected at 12:15 GMT.

In addition, the deficit on United States’ trade balance probably shrank to 40.60 billion USD during April, according to the median forecast by experts, from a deficit of 40.378 billion USD in the previous month. The trade balance, as an indicator, measures the difference in value between country’s exported and imported goods and services during the reported period. It reflects the net export of goods and services, or one of the components to form country’s Gross Domestic Product. Generally, exports reflect economic growth, while imports indicate domestic demand. In case the trade balance deficit contracts more than expected, this will provide support to US dollar. The Bureau of Economic Analysis is to release the official figure at 12:30 GMT.

Moreover, activity in United States’ sector of services probably rose to a seven-month high in May, with the corresponding non-manufacturing PMI coming in at a reading of 55.3 according to expectations, from 55.1 in April. This is a compound index, based on the values of four equally-weighted components, that comprise it. These sub-indexes reflect seasonally adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and shipments.

Readings above the key level of 50.0 are indicative of expanding activity. In case market expectations are exceeded, US dollar would be boosted. The Institute for Supply Management is scheduled to release official data at 14:00 GMT.

Canada

Canada’s trade balance probably produced a surplus at the amount of 0.100 billion CAD during April, according to the median estimate by experts. In March, nation’s trade surplus was 0.079 billion CAD. Higher than projected surplus would be supportive for the loonie, as Canadian dollar is also known. Statistics Canada will release the official figure at 12:30 GMT.

In addition, the Bank of Canada will probably keep its benchmark interest rate intact at 1.0% for a 29th consecutive time. The Bank of Canada holds its monetary policy in order to set the short-term interest rates. This is accomplished by changing the so-called “overnight” rate. This is the interest rate that major financial institutions pay as interest in the exchange of money between them overnight. Changes in the overnight rate influence other interest rates, such as interest rates on consumer loans, as well as those tied to mortgages. The purpose of the Canadian monetary policy is to maintain the level of inflation as measured by CPI on an annual basis and for this purpose the central bank works closely with the government. Since 1995 the target range is set between 1 and 3 percent. In November 2000, the bank introduced a system of eight fixed dates during the year, to discuss possible changes in interest rates. Decisions are taken by consensus. The Governing Council meeting usually starts on Friday, with the development of general economic analysis and future model of economic development, as well as identifying the trend and inflation. By the end of the day the bank announces its decision on the base rate and holds a press conference on the decision.

At 14:00 GMT, the Bank of Canada will announce its interest rate decision. In case the central bank preserves the main interest rate or in case the bank raises it, this will certainly heighten the loonie’s appeal.

Technical view

According to Binary Tribune’s daily analysis, in case USD/CAD manages to breach the first resistance level at 1.0930, it will probably continue up to test 1.0941. In case the second key resistance is broken, the pair will probably attempt to advance to 1.0961.

If USD/CAD manages to breach the first key support at 1.0899, it will probably continue to slide and test 1.0879. With this second key support broken, the movement to the downside will probably continue to 1.0868.