Forex Market: USD/CAD daily trading outlook

Yesterdays trade saw USD/CAD within the range of 1.2605-1.2441. The pair closed 0.87% lower at 1.2486.

At 7:15 GMT today USD/CAD was up 0.05% for the day at 1.2492. The cross held in a daily range of 1.2477 – 1.2500.

Fundamentals

United States

The New York Empire State Manufacturing Index probably rose to a reading of 7.00 in April, according to the median forecast by experts, from 6.90 in the prior month.

The gauge is based on the monthly Empire State Manufacturing Survey, which is conducted by the Federal Reserve Bank of New York. About 200 top manufacturing executives respond to a questionnaire, sent out during the first day of the month. They provide estimates in regard to the performance of several business indicators from the prior month, while also forecasting performance during the upcoming six months.

The ”general business conditions” component of the index is based on a distinct question, posed on the Empire State Manufacturing Survey, which means it is not a weighted average of the other indicators. These indicators, which are only applicable to the manufacturing facilities of survey respondents in the region of New York, include new orders, shipments, unfilled orders, delivery time, inventories, prices paid, prices received, number of employees including contract workers, average employee work week, technology spending and capital expenditures.

Readings above 0.00 are indicative of improving business conditions in the region. Lower-than-anticipated index values will usually have a negative effect on the US dollar. The Federal Reserve Bank of New York is expected to release the official reading at 12:30 GMT.

Industrial output

Industrial production in the United States probably contracted 0.3% in March from a month earlier, following a 0.1% growth in February.

The index of industrial production reflects the change in overall inflation-adjusted value of output in the sectors of manufacturing, mining and utilities. The index is sensitive to consumer demand and interest rates. As such, industrial production is an important tool for future GDP and economic performance forecasts. Those figures are also used to measure inflation by central banks as very high levels of industrial output may lead to uncontrolled levels of consumption and rapid inflation. It is a coincident indicator, which means that changes in its levels generally echo similar shifts in overall economic activity. A larger-than-projected increase in the index would usually boosts demand for the US dollar.

The Federal Reserve is to release the production data at 13:15 GMT.

In addition, Capacity Utilization Rate in the country probably decreased to 78.7% in March from 78.9% in February. If confirmed, this would be the fourth straight monthly decline. This indicator represents the optimal rate for a stable production process, or the highest possible level of production in an enterprise, in case it operates within a realistic work schedule and has sufficient raw materials and inventories at its disposal. High rates of capacity utilization usually lead to inflationary pressures. In general, higher-than-anticipated rates tend to be dollar positive.

Also due today, the Federal Reserve will release its “Beige Book” report at 18:00 GMT. It is published eight times during the year. Each of the banks in the 12 Federal Reserve Districts gathers data in regard to the countrys current economic situation 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

Manufacturing sales in Canada probably dropped 0.2% in February from a month earlier, according to market expectations, following a 1.7% decline in January. The Monthly Survey of Manufacturing features statistical data regarding sales of finished goods, inventories, unfilled orders and new orders in Canadas sector of manufacturing. About 10 500 items and 27 000 companies are encompassed.

Manufacturing sales are considered as an indicator of demand in the future. A decrease in sales (shipments) speaks of weaker demand, and vice versa. Therefore, in case shipments decreased at a faster than projected pace, this might have a bearish impact on the Canadian dollar. Statistics Canada will release the manufacturing data at 12:30 GMT.

Monetary decision

Bank of Canada’s (BoC) Governing Council will probably leave 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.

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 of 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 14:00 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2511. In case it penetrates the first resistance level at 1.2580, it will encounter next resistance at 1.2675. If breached, upside movement may attempt to advance to 1.2744.

If the cross drops below its S1 level at 1.2416, it will next see support at 1.2347. If the second key support zone is breached, downward movement may extend to 1.2252.

In weekly terms, the central pivot point is at 1.2538. The three key resistance levels are as follows: R1 – 1.2693, R2 – 1.2823, R3 – 1.2978. The three key support levels are: S1 – 1.2408, S2 – 1.2253, S3 – 1.2123.