Forex Market: USD/CAD daily trading forecast

Yesterday’s trade saw USD/CAD within the range of 1.2429-1.2545. The pair closed at 1.2496, losing 0.31% on a daily basis.

At 9:21 GMT today USD/CAD was up 0.17% for the day to trade at 1.2517. The pair touched a daily high at 1.2518 at 9:13 GMT.

Fundamentals

United States

Change in employment by ADP

Employers in the US non-farm private sector probably added 220 000 new jobs during February, according to the median estimate by experts, following 213 000 new positions added in January. The latter has been the lowest gain in jobs since August 2014, 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 the government’s employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs has a direct link to consumer spending, while the latter is a major driving force behind economic growth. In case new jobs growth came above expectations, this would bolster demand for the US dollar. The official figure is scheduled to be published at 13:15 GMT.

ISM Non-Manufacturing PMI

Activity in United States’ sector of services probably was little changed in February, with the corresponding non-manufacturing PMI coming in at a reading of 56.5, according to expectations, down from 56.7 in January. If so, February would be the 61st consecutive month, when the gauge stood in the area above 50.0. 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 optimism (expanding activity). In case, however, the index fell more than anticipated, this would lead to a sell-off of the US dollar. The Institute for Supply Management (ISM) is to release the official PMI reading at 15:00 GMT.

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 0.75% at its policy meeting today, according to expectations. At its meeting on January 21st the central bank cut its benchmark by 0.25% to the current level, citing the possible negative effect, which the recent drop in oil prices might have on consumer inflation and economic growth in the country. The Bank Rate was reduced to 1.00% from 1.25%, while the deposit rate was lowered to 0.50% from 0.75%.

According to the most recent BoC Statement, “Inflation has remained close to the 2 per cent target in recent quarters. Core inflation has been temporarily boosted by sector-specific factors and the pass-through effects of the lower Canadian dollar, which are offsetting disinflationary pressures from slack in the economy and competition in the retail sector. Total CPI inflation is starting to reflect the fall in oil prices.”

“Oil’s sharp decline in the past six months is expected to boost global economic growth, especially in the United States, while widening the divergences among economies.”

“Although there is considerable uncertainty around the outlook, the Bank is projecting real GDP growth will slow to about 1 1/2 per cent and the output gap to widen in the first half of 2015. The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar, and the Bank’s monetary policy response. The Bank expects Canada’s economy to gradually strengthen in the second half of this year, with real GDP growth averaging 2.1 per cent in 2015 and 2.4 per cent in 2016. The economy is expected to return to full capacity around the end of 2016, a little later than was expected in October.”

“Weaker oil prices will pull down the inflation profile. Total CPI inflation is projected to be temporarily below the inflation-control range during 2015, moving back up to target the following year. Underlying inflation will ease in the near term but then return gradually to 2 per cent over the projection horizon.”

Short-term interest rates are of utmost importance for the valuation of national currencies. In case Bank of Canada is hawkish about inflationary pressure and overall economic activity 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 1.2490. In case USD/CAD manages to breach the first resistance level at 1.2551, it will probably continue up to test 1.2606. In case the second key resistance is broken, the pair will probably attempt to advance to 1.2667.

If USD/CAD manages to breach the first key support at 1.2435, it will probably continue to slide and test 1.2374. With this second key support broken, the movement to the downside will probably continue to 1.2319.

The mid-Pivot levels for today are as follows: M1 – 1.2347, M2 – 1.2405, M3 – 1.2463, M4 – 1.2521, M5 – 1.2579, M6 – 1.2637.

In weekly terms, the central pivot point is at 1.2519. The three key resistance levels are as follows: R1 – 1.2654, R2 – 1.2801, R3 – 1.2936. The three key support levels are: S1 – 1.2372, S2 – 1.2237, S3 – 1.2090.