Forex Market: USD/CAD daily trading outlook

Fridays trade saw USD/CAD within the range of 1.2349 – 1.2273. The pair closed 0.25% higher at 1.2322, rising for a second day and trimming its weekly decline to 0.9%.

At 7:01 GMT today USD/CAD was up 0.04% for the day to trade at 1.2314. The cross held in a daily range of 1.2306 – 1.2340.

Fundamentals

United States

The New York Empire State Manufacturing Index probably rose to a reading of 6.00 in June, according to the median forecast by experts, from 3.09 in the prior month. In April, the gauge came in at -1.19, slipping into negative territory for the first time since December when it declined to -1.23.

The index 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 their estimates in regard to the performance of several business indicators from the prior month, while also forecasting performance during the upcoming six months. The data are due out at 12:30 GMT.

A separate report by the Federal Reserve is expected to show that industrial output in the United States probably rose 0.3% in May, following a 0.3% contraction in each of the preceding two months.

The index of industrial production reflects the change in the overall inflation-adjusted value of output in the sectors of manufacturing, mining and utilities. It is sensitive to consumer demand and interest rates and 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 boost demand for the US dollar.

In addition, Capacity Utilization Rate probably inched up to 78.3% last month from 78.2 in April. This indicator represents the percentage of production capacity being utilized in the industrial sector and reflects overall growth and demand in the country. Its reading is used for a comparison with 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. The Federal Reserve is to release the industrial production data at 13:15 GMT.

Also due today, the National Association of Home Builders (NAHB) will likely report that its Housing Market Index probably rose in June to 56.0, according to expectations, from 54.0 in May. If so, this would be the twelfth consecutive month, when the gauge stood in the area above 50.0. The indicator is based on a monthly survey in regard to current home sales and expected sales in the coming six months. Values above the key level of 50.0 indicate that housing market conditions are good. Therefore, higher-than-projected readings would provide support to the greenback. The official data are scheduled for release at 14:00 GMT.

Canada

Manufacturing sales in Canada probably dropped 0.5% in April on a monthly basis, according to market expectations, following a 2.9% surge in March, which was the fastest rate of increase since July 2014. 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. An increase in the number of goods and unsold inventories suggests that demand is not sufficient and vice versa. At the same time, a decrease in sales (shipments) speaks of weaker demand. 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.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2315. In case it penetrates the first resistance level at 1.2356, it will encounter next resistance at 1.2391. If breached, upside movement may attempt to advance to 1.2432.

If the cross drops below its S1 level at 1.2280, it will next see support at 1.2239. If the second key support zone is breached, downward movement may extend to 1.2204.

In weekly terms, the central pivot point is at 1.2331. The three key resistance levels are as follows: R1 – 1.2464, R2 – 1.2605, R3 – 1.2738. The three key support levels are: S1 – 1.2190, S2 – 1.2057, S3 – 1.1916.