Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.2538 – 1.2420. The pair closed 0.26% lower at 1.2425, snapping four straight sessions of gains.

At 7:16 GMT today USD/CAD was up 0.10% for the day to trade at 1.2446. The cross held in a daily range of 1.2411 – 1.2448 and is up 2.2% for the week so far after 5 straight weekly losses.

Fundamentals

United States

The second estimate of the US Gross Domestic Product will probably point to an annualized rate of growth of -0.8% in the first quarter of 2015, according to the median forecast by analysts. The advance GDP estimate for Q1, reported on April 29th, showed an annual economic expansion of 0.2%, the weakest since the first quarter of 2014, as business investment and exports plunged, while consumption grew at a slower pace. In the last quarter of 2014, the economy expanded at an annualized rate of 2.2%, according to final data released on March 27th.

Real personal consumption expenditures rose 1.9% during the first quarter, the advance reading showed, compared with an increase of 4.4% in Q4. Real nonresidential fixed investment dropped 3.4% in the fourth quarter, compared with an increase of 4.7% in the prior. Real exports of goods and services slumped 7.2% in Q1 after an increase of 4.5% in the fourth quarter, while real federal government consumption expenditures and gross investment inched up 0.3%, following a decrease of 7.3% in the fourth quarter.

Currency traders will usually look for higher rates of growth as a sign that interest rates will follow the same direction. Higher interest rates will attract more investors, which will increase demand for the US dollar. If an economy is experiencing a robust rate of growth, the benefits will eventually affect the end consumer because of the increased likelihood of spending. Furthermore, through increased consumer expenditures the economy has the potential to expand even more. In case the second GDP estimate outpaced expectations, this would certainly boost demand for the US dollar. The revised GDP figure is due out at 13:30 GMT.

Meanwhile, the monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States deteriorated in May. The final reading of the corresponding index, which usually comes out two weeks after the preliminary data, will probably register at 89.9, up from the preliminary value of 88.6 which was reported on May 15th, but below Aprils final reading of 95.9.

The survey encompasses about 500 respondents throughout the country. The index is comprised of two major components, a gauge of current conditions and a gauge of expectations. The current conditions index is based on the answers to two standard questions, while the index of expectations is based on three standard questions. All five questions have an equal weight in determining the value of the overall index.

The sub-index of current economic conditions, which measures US consumers’ views of their personal finances, probably fell to a reading of 100.5 in May from 107.0 in April. The sub-index of consumer expectations likely dropped to 83.1 from a final value of 88.8 a month earlier.

In case the gauge of consumer sentiment showed a steeper drop than anticipated, this would have a bearish effect on the US dollar. The final reading is due out at 14:00 GMT.

Canada

Canadian Gross Domestic Product (GDP) probably expanded 0.2% in March from a month earlier, according to the median forecast by experts, following a flat reading in February. Year-on-year, Canada’s economy probably grew at the pace of 0.3% in the first quarter, after in Q4 GDP expanded by 2.4% and in Q3 by 3.2%.

Quarter-on-quarter, the Canadian economy is expected to have achieved 0% growth in the first quarter. GDP grew 0.6% in the last three months of 2014 compared to the previous quarter, dragged down by a decline in business investment and exports. Business gross fixed capital formation slid 0.1% in the fourth quarter, while exports of goods and services dropped 0.4% and imports rose 0.4%. Final consumption expenditure of households increased 0.5% and most major industrial sectors boosted production. The finance and insurance sectors, coupled with oil and gas extraction, also contributed to the fourth quarters economic expansion.

Statistics Canada is expected to release the official Q1 figure at 12:30 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2461. In case it penetrates the first resistance level at 1.2502, it will encounter next resistance at 1.2579. If breached, upside movement may attempt to advance to 1.2620.

If the cross drops below its S1 level at 1.2384, it will next see support at 1.2343. If the second key support zone is breached, downward movement may extend to 1.2266.

In weekly terms, the central pivot point is at 1.2202. The three key resistance levels are as follows: R1 – 1.2399, R2 – 1.2519, R3 – 1.2716. The three key support levels are: S1 – 1.2082, S2 – 1.1885, S3 – 1.1765.