Forex Market: USD/CAD daily trading outlook

Fridays trade saw USD/CAD within the range of 1.2398 – 1.2309. The pair closed 0.1% lower at 1.2318, settling the week 0.4% higher and ending three straight weekly declines.

At 07:40 GMT today USD/CAD was down 0.01% for the day to trade at 1.2321. The cross held in a daily range of 1.2304 – 1.2357.

Fundamentals

United States

Pending home sales in the United States probably rose 1.2% in May, a report by the National Association of Realtors (NAR) is expected to show at 14:00 GMT, following a better-than-expected 3.4% increase in April. If confirmed, this would be the fifth straight month of growth. Year-on-year, pending home sales growth is projected at 16.5%, up from 14% during the preceding month.

When a sales contract is accepted for a property, it is recorded as a pending home sale. As an indicator, the index provides information on the number of future home sales, which are in the pipeline. It uses data from real estate agents and brokers at the point of a sale of a contract and is currently the most accurate indicator regarding the US housing sector. It samples over 20% of the market. In addition, over 80% of pending house sales are converted to actual home sales within 2 or 3 months, thus giving the index a predictive value about actual home sales.

In case pending home sales increased more than anticipated, this would have a certain bullish effect on the greenback.

A separate report is expected to show that manufacturing activity in Texas probably contracted at a slower pace in June, compared to a month earlier, with the corresponding Dallas Fed Manufacturing Index projected to come in at -16.0 from -20.8 in May, which was the lowest in almost six years.

The Dallas Fed conducts a survey among around 100 business executives regarding changes in the companies output, employment, orders, prices, and other variables. Each of the underlying indexes is calculated by subtracting the percentage of respondents reporting a decrease from those reporting an increase. The results are presented in a scale spanning from -100 to 100, with the 0 level being the threshold between an overall positive assessment of the states factory activity and an overall negative one. A higher-than-expected reading should be considered as bullish for the US dollar, and vice versa. The data are due out at 14:00 GMT.

Canada

Prices of raw materials in Canada probably increased by 4.5% in May from a month earlier, Statistics Canada is expected to report at 12:30 GMT. The Raw Materials Price Index rose 3.8% in April, reversing a 1.5% decline in March. In annual terms, commodity prices were down 20.9% in April.

The RMPI measures the prices paid by Canadian manufacturers for key raw materials and includes products that are not produced in Canada. It is a leading gauge of consumer inflation, as higher prices of producer input are typically transferred down the chain towards the end-consumer. A higher-than-expected reading should support the Canadian dollar, and vice versa.

Meanwhile, the Canadian Industrial Product Price Index, which measures the change in prices of domestically produced goods sold by manufacturers, probably rose by 0.5% in May, following a 0.9% contraction a month earlier. Year-on-year, prices were down 2.4% in April.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2342. In case it penetrates the first resistance level at 1.2374, it will encounter next resistance at 1.2431. If breached, upside movement may attempt to advance to 1.2463.

If the cross drops below its S1 level at 1.2285, it will next see support at 1.2253. If the second key support zone is breached, downward movement may extend to 1.2196.

In weekly terms, the central pivot point is at 1.2319. The three key resistance levels are as follows: R1 – 1.2423, R2 – 1.2528, R3 – 1.2632. The three key support levels are: S1 – 1.2214, S2 – 1.2110, S3 – 1.2005.