Forex Market: USD/CAD daily trading forecast

Yesterday’s trade saw USD/CAD within the range of 1.1318-1.1424. The pair closed at 1.1406, gaining 0.70% on a daily basis.

At 7:53 GMT today USD/CAD was down 0.04% for the day to trade at 1.1395. The pair touched a daily low at 1.1384.

Fundamentals

United States

Change in non-farm employment

Employers in the US non-farm private sector probably added 224 000 new jobs during November, according to the median estimate by experts, following 230 000 new positions added in October. If so, this would be the lowest gain in jobs since August, when 202 000 jobs were added. The employment report by Automated Data Processing Inc. (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of governments employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs is considered of utmost importance for consumer spending, while the latter is a major driving force behind economic growth. In case expectations were exceeded, this would bolster demand for the dollar. The official figure is scheduled to be published at 13:15 GMT.

ISM Non-Manufacturing data

Activity in United States’ sector of services probably slightly improved in November, with the corresponding non-manufacturing PMI coming in at a reading of 57.5, according to expectations, from 57.1 in October. The latter has been the lowest level of the PMI since June, when it was reported at 56.0. 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 supplier deliveries.

The business report is based on data compiled from monthly replies to questions asked of over 370 purchasing and supply executives operating in over 62 different industries, which represent nine divisions from the Standard Industrial Classification (SIC) categories.

Participants can either respond with “better”, “same”, or “worse” to the questions about the industry, in which they operate. The resulting PMI value is measured from 0 to 100. If the index shows a value of 100.0, this means that 100% of the respondents reported an improvement in conditions. If the index shows a value of 0, this means that 100% or the respondents reported a deterioration in conditions. If 100% of the respondents saw no change in conditions, the index will show a reading of 50.0. Therefore, readings above the key level of 50.0 are indicative of expanding activity. In case market expectations were exceeded, the US dollar would receive a boost. The Institute for Supply Management (ISM) is to release the official PMI reading at 15:00 GMT.

”Beige Book” report

At 19:00 GMT the Federal Reserve is to release its “Beige Book” report. It is published eight times during the year. Each of the banks in the 12 Federal Reserve Districts gathers data in regard to current economic situation in the country on the basis of interviews with key business contacts, economists, market experts, and other sources. In case the Beige Book presents an optimistic economic outlook, this will usually support the greenback, while a pessimistic view will have a bearish effect on the currency.

Canada

Bank of Canada policy decision

Bank of Canada’s (BoC) Governing Council probably left the target for the benchmark interest rate (overnight rate) without change at 1.0% at its policy meeting today, according to expectations. At its meeting on October 22nd the central bank left the Bank Rate unchanged at 1.25% and the deposit rate at 0.75%.

According to the most recent BoC Statement, ”Inflation in Canada is close to the 2 percent target. Core inflation rose more rapidly than was expected in the Bank’s July Monetary Policy Report (MPR), mainly reflecting unexpected sector-specific factors. Total CPI inflation is evolving broadly as expected, as the pickup in core inflation was largely offset by lower energy prices. Underlying inflationary pressures are muted, given the persistent slack in the economy and the continued effects of competition in the retail sector.”

”Although the outlook remains for stronger momentum in the global economy in 2015 and 2016, the profile is weaker than in July and growth prospects are diverging across regions. Persistent headwinds continue to buffet most economies and growth remains reliant on exceptional policy stimulus.”

”Canada’s real GDP growth is projected to average close to 2 1/2 percent over the next year before slowing gradually to 2 percent by the end of 2016, roughly the estimated growth rate of potential output.”

According to the central bank, the risks to its inflation forecast ”are roughly balanced”.

Short-term interest rates are of utmost importance for the valuation of national currencies. In case Bank of Canada is hawkish about inflationary pressure in the economy and, thus, decides to introduce a rate hike, this will usually provide support to the loonie. Respectively, a decision (maintaining or cutting the benchmark rate), a result of a more dovish view on economic development, will usually have a bearish effect on the national currency.

The official policy decision is scheduled to be announced at 15:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.1383. In case USD/CAD manages to breach the first resistance level at 1.1447, it will probably continue up to test 1.1489. In case the second key resistance is broken, the pair will probably attempt to advance to 1.1553.

If USD/CAD manages to breach the first key support at 1.1341, it will probably continue to slide and test 1.1277. With this second key support broken, the movement to the downside will probably continue to 1.1235.

The mid-Pivot levels for today are as follows: M1 – 1.1256, M2 – 1.1309, M3 – 1.1362, M4 – 1.1415, M5 – 1.1468, M6 – 1.1521.

In weekly terms, the central pivot point is at 1.1363. The three key resistance levels are as follows: R1 – 1.1500, R2 – 1.1582, R3 – 1.1719. The three key support levels are: S1 – 1.1281, S2 – 1.1144, S3 – 1.1062.