Forex Market: USD/CAD daily trading forecast

Yesterday’s trade saw USD/CAD within the range of 1.1731-1.1840. The pair closed at 1.1836, gaining 0.63% on a daily basis.

At 7:44 GMT today USD/CAD was down 0.04% for the day to trade at 1.1830. The pair touched a daily low at 1.1823.

Fundamentals

United States

Change in employment

Employers in the US non-farm private sector probably added 225 000 new jobs during December, according to the median estimate by experts, following 208 000 new positions added in November. The latter has been 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 due to be published at 13:15 GMT.

Balance of trade

The deficit on US balance of trade probably narrowed to USD 42.0 billion during November from a trade gap of USD 43.4 billion, registered in October. If so, this would be the smallest shortfall since August, when a deficit of USD 39.99 billion was reported. In October total exports expanded 1.2% to reach USD 197.5 billion, supported by record sales of capital goods as customers abroad purchased more American-made aircraft, generators and industrial equipment. Total imports surged 0.9% to USD 241 billion, due to the highest shipments of capital goods, foods, feeds and beverages ever recorded. Demand for foreign automobiles and parts also contributed to this increase.

The trade balance, as an indicator, measures the difference in value between the 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 the Gross Domestic Product. Generally, exports are linked to economic growth, while imports indicate how strong domestic demand is. In case the trade balance deficit shrank more than anticipated, this would increase demand for the greenback. The Bureau of Economic Analysis will release the official trade data at 13:30 GMT.

FOMC Minutes

At 19:00 GMT the Federal Open Market Committee (FOMC) will release the minutes from its meeting on policy held on December 16th-17th. The minutes offer detailed insights on FOMC’s monetary policy stance. This release is closely examined by traders, as it may provide clues over interest rate decisions in the future. High volatility is usually present after the publication.

The Committee pledged to maintain borrowing costs close to zero for a considerable period of time, while also indicating that it was moving towards a rate hike at sometime this year. According to Federal Reserves most recent press release: ”Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committees 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. However, if incoming information indicates faster progress toward the Committees employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated.”

Canada

Balance of trade

Canadian balance of trade probably produced a deficit of CAD 0.2 billion during November, according to the median estimate by experts, following a trade surplus of CAD 0.1 billion in October. The latter has been the smallest surplus since March 2012. In October total exports climbed 0.1% to CAD 44.9 billion, as exports of industrial machinery, equipment and parts surged 8.0% to CAD 2.6 billion, or the highest value since the record high in October 2008. At the same time, total imports grew 0.5% to reach CAD 44.8 billion, as imports of consumer goods rose 3.1% to CAD 9.2 billion, while imports of aircraft and other transportation equipment and parts soared 12.4% to an all-time high of CAD 1.7 billion, according to the report by the Statistics Canada.

In case the trade balance registered a larger deficit than projected, this would have a bearish effect on the Canadian dollar. Statistics Canada will release the official trade data at 13:30 GMT.

Ivey PMI

Activity among purchasing managers in Canada probably slowed down in December, with the correspoding seasonally adjusted PMI coming in at a value of 52.3. However, this would be the sixth consecutive month, during which the indicator inhabited the area above the 50.0 level. In November the index stood at 56.9. This indicator is based on a survey sponsored by Richard Ivey School of Business and Canadian Purchasing Management Association. It encompasses 175 respondents in both public and the private sector, selected in accordance with their geographic location and activity, so that the entire economy is covered. Activity among purchasing managers is closely watched by market players, as managers usually have an early access to data regarding performance of their companies, which could be used as a leading indicator of overall economic activity. Readings above the key level of 50.0 are indicative of optimism (expansion in activity). In case the PMI demonstrated a larger slowdown than expected, this would reduce demand for the loonie. The official result is due out at 15:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.1802. In case USD/CAD manages to breach the first resistance level at 1.1874, it will probably continue up to test 1.1911. In case the second key resistance is broken, the pair will probably attempt to advance to 1.1983.

If USD/CAD manages to breach the first key support at 1.1765, it will probably continue to slide and test 1.1693. With this second key support broken, the movement to the downside will probably continue to 1.1656.

The mid-Pivot levels for today are as follows: M1 – 1.1675, M2 – 1.1729, M3 – 1.1784, M4 – 1.1838, M5 – 1.1893, M6 – 1.1947.

In weekly terms, the central pivot point is at 1.1710. The three key resistance levels are as follows: R1 – 1.1855, R2 – 1.1930, R3 – 1.2075. The three key support levels are: S1 – 1.1635, S2 – 1.1490, S3 – 1.1415.