Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.2510 – 1.2380. The pair closed 0.43% higher at 1.2454, reversing a 1% drop the previous day.

At 7:06 GMT today USD/CAD was up 0.20% for the day to trade at 1.2476. The cross held in a daily range of 1.2448 – 1.2478 and is up 0.2% for the week so far.

Fundamentals

United States

The number of people in the United States who filed for unemployment assistance for the first time during the week ended May 30th probably declined to 279 000 from 282 000 in the previous seven days, which was the highest in five weeks. The 4-week moving average, an indicator used to iron out week-to-week volatility, was at 271 500 last week, above the previous weeks average of 266 500.

Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the count of claims dropped more than projected, this would have a bullish effect on the greenback.

The number of continuing jobless claims probably dropped to 2 208 000 during the week ended May 23rd from 2 222 000 the previous period. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago. The Department of Labor is to release the weekly report at 12:30 GMT.

Nonfarm productivity in the first quarter of the year is expected to have contracted by 2.9% compared to the previous three months, a second straight quarterly decline, the Bureau of Labor Statistics will report.

This indicator measures the change in labor efficiency when producing goods and services, without taking into account the farming industry. Productivity is the real value of output produced by a unit of labor for a certain time. Productivity and wage inflation are directly linked – a drop in productivity is equivalent to a rise in the workers wage. A higher-than-expected reading should be taken as dollar-positive and vice versa.

At the same time, unit labor costs, or the price businesses excluding the farming industry pay for labor, likely rose 5.9% in the first quarter, compared to 4.1% in the last three months of 2014. This is a leading indicator of consumer inflation. A higher-than-expected reading should be taken as supportive for the dollar, and vice versa.

Meanwhile, the number of corporate layoffs in May likely fell to 58 900, Challenger, Gray, & Christmas is expected to report. The Challenger Job Cuts indicator registered a reading of 61 600 in April, a sharp jump from 36 600 in March.

The report provides monthly information on the number of corporate layoffs by industry and region and serves as a gauge for investors to assess the strength of the countrys labor market. The data are due out at 11:30 GMT.

Canada

Activity among purchasing managers in Canada probably improved in May, albeit at a slower pace, with the corresponding seasonally-adjusted PMI projected to come in at a value of 55.5. The metric posted a sharp rebound to 58.2 in April from 47.9 in March, which ended three straight months of contraction in the sector.

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 the public and 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 at the key level of 50.0 are indicative of no change in business conditions. In case, however, the PMI demonstrated a larger-than-expected improvement, this would boost demand for the loonie. The data are due out at 14:00 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2448. In case it penetrates the first resistance level at 1.2516, it will encounter next resistance at 1.2578. If breached, upside movement may attempt to advance to 1.2646.

If the cross drops below its S1 level at 1.2386, it will next see support at 1.2318. If the second key support zone is breached, downward movement may extend to 1.2256.

In weekly terms, the central pivot point is at 1.2420. The three key resistance levels are as follows: R1 – 1.2567, R2 – 1.2686, R3 – 1.2833. The three key support levels are: S1 – 1.2301, S2 – 1.2154, S3 – 1.2035.