Forex Market: CAD/MXN daily trading forecast

Yesterday’s trade saw CAD/MXN within the range of 11.9779-12.0820. The pair closed at 12.0805, gaining 0.59% on a daily basis.

At 8:27 GMT today CAD/MXN was down 0.09% for the day to trade at 12.0663. The pair touched a daily low at 12.0488 at 5:55 GMT.

Fundamentals

Canada

The annualized consumer inflation in Canada probably accelerated to 2.1% in October, according to market expectations, from 2.0% in September. If so, this would match the rate reported in August and July. Shelter costs climbed at an annualized rate of 2.7% during September, following a 2.8% gain in August, supported by a 16.2% surge in natural gas prices. Food prices rose 2.7% in September compared to the same month a year ago, after another 2.2% gain in August. Consumers also paid more for homeowners home and mortgage insurance, property taxes and electricity in September, while the mortgage interest cost index dropped year-over-year, according to the report by the Statistics Canada.

In monthly terms, the Consumer Price Index probably fell 0.2% in October, after gaining 0.1% in September.

Key categories in Canadian CPI basket are Shelter (accounting for 27.5% of the total weight) and Transportation (19.3%). Other categories include Food (with a 16.1% share), Household Operations, Furnishings and Equipment (11.8%), Recreation, Education and Reading (11.8%), Clothing and Footwear (5.7%), Health and Personal Care (5%), while Alcoholic Beverages and Tobacco Products comprise the remaining 3%.

Bank of Canadas (BoC) annualized Core CPI, which excludes prices of fruits, vegetables, gasoline, fuel oil, natural gas, mortgages, intercity transportation, and tobacco products, probably rose to 2.2% in October. In September annualized core inflation was reported at 2.1%, or the same as in August and also the highest level since April 2012. If market expectations were met, this would be the highest annual rate of core inflation since February 2012, when it was 2.3%. This is the key measure of inflation, on which the central bank bases its decisions regarding monetary policy. In case the Core CPI increased more than projected, but still remained within BoC inflation range target (1-3%), this would support demand for the loonie, as Canadian dollar is also known. The official CPI report by Statistics Canada is due out at 13:30 GMT.

Mexico

Mexicos annualized Gross Domestic Product probably expanded 2.2% during the third quarter of the year compared to the second quarter. In Q2 economy grew at an annualized rate of 1.6%, down from a revised 1.9% increase during the first three months of the year. The agriculture sector expanded 2.6% year-on-year in Q2, slowing from a 4.6% growth during the previous quarter. Industrial output grew at an annualized rate of 1%, down from a 1.6% growth during the preceding quarter, while the mining industry kept its downtrend and contracted 1% in Q2.

Mexican GDP probably expanded 0.6% in Q3 compared to Q2, according to market expectations, following a 1.0% growth in the second quarter. The latter has been the fastest quarterly growth rate since Q3 2013, when economy expanded 1% as well.

The GDP represents the total monetary value of all goods and services produced by one nation over a specific period of time. Higher rates of growth suggest that interest rates may follow the same direction. Higher interest rates, on the other hand, will usually attract more investors, willing to purchase assets in the country, while, at the same time, this will increase demand for the local currency. Therefore, in case economic growth in Mexico surpassed the median forecast, this would provide support to the peso. Instituto Nacional de Estadística y Geografía is expected to publish the GDP report at 14:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 12.0468. In case CAD/MXN manages to breach the first resistance level at 12.1157, it will probably continue up to test 12.1509. In case the second key resistance is broken, the pair will probably attempt to advance to 12.2198.

If CAD/MXN manages to breach the first key support at 12.0116, it will probably continue to slide and test 11.9427. With this second key support broken, the movement to the downside will probably continue to 11.9075.

The mid-Pivot levels for today are as follows: M1 – 11.9251, M2 – 11.9772, M3 – 12.0292, M4 – 12.0813, M5 – 12.1333, M6 – 12.1854.

In weekly terms, the central pivot point is at 11.9863. The three key resistance levels are as follows: R1 – 12.0495, R2 – 12.1097, R3 – 12.1729. The three key support levels are: S1 – 11.9261, S2 – 11.8629, S3 – 11.8027.