Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.3202-1.3102. The pair closed 0.3% higher at 1.3191, rising for a fifth day.

At 07:14 GMT today USD/CAD was up 0.06% to trade at 1.3200, holding in a daily range of 1.3185 – 1.3214, and is up 0.9% on a weekly basis following six straight weeks of gains.

Fundamental view

United States

The Mortgage Bankers Association will release its mortgage applications data for the week ended July 31st at 11:00 GMT, projected to register an increase of 1.1%. The MBA Mortgage Applications index measures the change in the number of new applications for mortgages backed by the Association during the reported week. It includes both refinancing and home purchases. A better-than-expected reading should be considered as positive for the US dollar, and vice versa.

The index rose a seasonally-adjusted 0.8% in the week ended July 24th compared to a week earlier, and 1% on an unadjusted basis. The index of refinancing applications gained 2% from the previous week, while the gauge of loan requests for home purchases decreased 0.1%.

A separate report is expected to show that employers in the US non-farm private sector probably added 215 000 new jobs in July, according to the median estimate by experts, following a better-than-expected 237 000 new positions opened during June.

The employment report by Automated Data Processing Inc. (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of the government’s employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs has a direct link to consumer spending, while the latter is a major driving force behind economic growth. In case new jobs growth came in above expectations, this would bolster demand for the US dollar. The official figure is scheduled to be published at 12:15 GMT.

Trade balance

The US trade deficit probably expanded to $42.80 billion in June, according to market expectations, from an upward-revised trade gap of -$41.90 billion registered in May. Exports slid 0.77% in May to $188.6 billion, following a 1% increase in April, while imports slid 0.1% to $230.5 billion after a 3.3% plunge in April.

The trade balance measures the difference in value between the country’s exported and imported goods and services during the reported period. It reflects the net export of goods and services, or one of the components to form the Gross Domestic Product. Generally, exports are linked to economic growth, while imports indicate how strong domestic demand is. In case the trade balance deficit expanded more than anticipated, this would trim demand for the greenback. The Bureau of Economic Analysis will release the official trade data at 12:30 GMT.

Services sector activity

Activity in the US sector of services probably grew at a slightly faster pace in July, compared to June, with the final reading for the month expected to confirm a preliminary one released on July 28th of 55.2, whereas Junes final index was at 54.8. Values above the key level of 50.0 indicate expansion in the sector, and vice versa. Markit Economics will release the services and composite data at 13:45 GMT.

A more widely tracked report by the Institute for Supply Management reflecting the state of the US sector of services is also expected to show minor growth in July, with the corresponding ISM Non-Manufacturing PMI projected to register at 56.2 from 56.0 in June. If so, July would be the 66th consecutive month, when the gauge stood in the area above 50.0 and indicated growing services activity. Mays reading of 55.7 was the lowest since April 2014.

Canada

Canadas trade deficit probably slid to CAD 2.80 billion in June from a larger-than-expected gap of CAD -3.34 billion in May when exports fell 0.6% while imports rose 0.2%. If confirmed, this would be the ninth straight monthly trade deficit. Outbound shipments slid to CAD 42.0 billion in May, a fifth consecutive monthly decrease, while imports rose to CAD 45.3 billion as 7 out of 11 sections reported growth. Year-on-year, total exports declined by 6.7% while imports were up 2%.

Weekly pivot points

The weekly central pivot point is at 1.3014. The three key resistance levels are as follows: R1 – 1.3170, R2 – 1.3250, R3 – 1.3406. The three key support levels are: S1 – 1.2934, S2 – 1.2778, S3 – 1.2698.