Forex Market: EUR/CAD daily trading forecast

Yesterday’s trade saw EUR/CAD within the range of 1.4222-1.4376. The pair closed at 1.4223, losing 0.94% on a daily basis.

At 7:41 GMT today EUR/CAD was up 0.01% for the day to trade at 1.4230. The pair touched a daily high at 1.4244.

Fundamentals

Euro zone

French Business Climate

Business climate in France probably remained without change in December compared to November, according to market expectations, with the corresponding gauge being at 99.0. If so, this would be the highest reading since May, when the index was reported at 99.0. In October the gauge stood at 98.0. It reflects entrepreneurs’ sentiment about current business situation in the country and their expectations about business conditions. An index value of 100.0 suggests neutrality. Readings below 90.0 imply unusually high pessimism, while values above 110.0 suggest unusually high optimism among respondents in the survey. Higher-than-anticipated index readings may provide a limited support to the euro.

Euro zone Current Account

The surplus on Euro zones seasonally adjusted current account probably narrowed to EUR 28.0 billion in October from EUR 30.0 billion in September.

Regions current account (without a seasonal adjustment) produced a surplus at the amount of EUR 31.0 billion, or the largest since July, when a figure of EUR 32.8 billion was reported. An all-time high current account surplus was registered at EUR 32.91 billion in December 2013.

The current account reflects the difference between savings and investments in the Euro area. It is the sum of the balance of trade, net current transfers (cash transfers) and net income from abroad (earnings from investments made abroad plus money sent by individuals working abroad to their families back home, minus payments made to foreign investors).

A current account surplus indicates that the net foreign assets of the region have increased by the respective amount, while a deficit suggests the opposite. A country/region with a surplus on its current account is considered as a net lender to the rest of the world, while a current account deficit puts it in the position of a net borrower. A net lender is consuming less than it is producing, which means it is saving and those savings are being invested abroad, or foreign assets are created. A net borrower is consuming more than it is producing, which means that other countries are lending it their savings, or foreign liabilities are created. A contracting surplus or an expanding deficit on the areas current account usually has a bearish effect on the euro.

The European Central Bank is expected to release the official data at 9:00 GMT.

Canada

Consumer inflation

The annualized consumer inflation in Canada probably decelerated to 2.2% in November, according to market expectations, from 2.4% in the prior month. Octobers rate was supported by higher shelter and food prices. Shelter costs climbed at an annualized rate of 2.8%, mostly due to a 20.1% surge in natural gas prices. Food prices were also up by 2.8%, as cost of food purchased from stores rose 3.1%, supported by a 12.4% increase in meat prices. Cost of transportation rose 1.1% in October compared to October 2013, while prices of clothing and footwear went up 3.1%, according to the report by the Statistics Canada.

In monthly terms, the Consumer Price Index (CPI) probably fell 0.2% in November, after gaining 0.1% in October.

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 2.4% in November. In October the annualized core inflation was reported at 2.3%. If market expectations were met, this would be the highest annual rate of core inflation since February 2009, when it was registered at 2.45%. This is the key measure of inflation, on which the central bank bases its decisions regarding monetary policy. In case the Core CPI accelerated more than projected, but still remained within BoC inflation range target (1-3%), this would support demand for the Canadian dollar. The official CPI report by the Statistics Canada is due out at 13:30 GMT.

Retail Sales

Retail sales in Canada probably dropped 0.2% in October on a monthly basis, according to the median forecast by experts, following a 0.8% gain in September. The latter has been the fastest monthly rate of increase since June, when sales surged 1.2%. Retail sales, excluding sales of automobiles, probably expanded 0.2% in October compared to September, after a flat performance in the preceding month. Large-ticket purchases are excluded due to their high volatility, which could influence the general trend. In case retail sales dropped more than anticipated, this would lead to a sell-off in the Canadian dollar. Statistics Canada is to release the official report at 13:30 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.4274. In case EUR/CAD manages to breach the first resistance level at 1.4325, it will probably continue up to test 1.4428. In case the second key resistance is broken, the pair will probably attempt to advance to 1.4479.

If EUR/CAD manages to breach the first key support at 1.4171, it will probably continue to slide and test 1.4120. With this second key support broken, the movement to the downside will probably continue to 1.4017.

The mid-Pivot levels for today are as follows: M1 – 1.4069, M2 – 1.4146, M3 – 1.4223, M4 – 1.4300, M5 – 1.4377, M6 – 1.4454.

In weekly terms, the central pivot point is at 1.4242. The three key resistance levels are as follows: R1 – 1.4353, R2 – 1.4410, R3 – 1.4521. The three key support levels are: S1 – 1.4185, S2 – 1.4074, S3 – 1.4017.