Forex Market: USD/CAD daily trading forecast

Yesterday’s trade saw USD/CAD within the range of 1.2827-1.2951. The pair closed at 1.2865, slipping 0.55% on a daily basis, while extending the loss from Wednesday. The daily low has been the lowest level since July 15th, when a low of 1.2719 was reached.

At 8:33 GMT today USD/CAD was up 0.29% for the day to trade at 1.2896. The pair touched a daily high at 1.2899 at 8:32 GMT. USD/CAD is trading below the weekly central pivot level for a third straight day and a bearish impulse may send the pair down for another test of the weekly S1 at 1.2835. A break below it may lead to a test of 1.2800. On the other hand, a bullish impulse, fueled by upbeat fundamental data, may send the pair up for a test of the area 1.2935-1.2950.

Today USD/CAD trading may be influenced by a number of macroeconomic reports as listed below.

Fundamentals

United States

Industrial production, Capacity utilization

Industrial output in the United States probably shrank for a second straight month in September, down at a monthly rate of 0.2%, according to market expectations. In August industrial production contracted 0.4%, or at the sharpest monthly pace since March, when the index posted a 0.6% decline. Manufacturing production, which accounts for almost three quarters of total industrial production, shrank 0.5% in August, as production of durable goods fell 0.9%, while production of nondurable goods remained without change. The index for mining went down 0.6% in August, following a 1.8% surge in July. The index for utilities expanded 0.6% in August, following a 0.2% drop in the preceding month.

The index of industrial production reflects the change in overall inflation-adjusted value of output in the three major sectors mentioned above. The index is sensitive to consumer demand and interest rates. As such, industrial production 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 production 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. On the other hand, a larger-than-projected monthly decline in the index would usually have a moderate bearish effect on the US dollar.

The Board of Governors of the Federal Reserve is to release the production data at 13:15 GMT.

In addition, Capacity Utilization rate in the country probably decreased to 77.4% in September from 77.6% in August. If so, this would be the lowest utilization rate since June 2011, when a rate of 76.7% was reported. This indicator represents 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. Lower rates of capacity utilization usually imply weaker inflationary pressure.

Reuters/Michigan Consumer Sentiment Index – preliminary reading

The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States improved for a second straight month in October. The preliminary reading of the corresponding index, which usually comes out two weeks ahead of the final data, probably rose to 89.0 during the current month from a final reading of 87.2 in September. The survey encompasses about 500 respondents throughout the country. The index is comprised by 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 decreased to a final reading of 101.2 from a preliminary 100.3 in September, after a month ago it stood at 105.1.

The sub-index of consumer expectations came in at a reading of 78.2, up from a preliminary value of 76.4 in September, but down from a final reading of 83.4, registered in August.

Participants in the September survey expect that the rate of inflation will be 2.8% during the next year, or down from 2.9% in the preliminary data and unchanged compared to August.

In case the gauge of consumer sentiment increased at a steeper pace than projected in October, this would have a moderate-to-strong bullish effect on the greenback. The preliminary reading is due out at 14:00 GMT.

Canada

Manufacturing sales

Manufacturing sales in Canada probably dropped for the first time in four months in August, going down at a monthly rate of 1.0%, according to market expectations, following a 1.7% surge in July compared to June. If so, it would be the sharpest monthly decline since April, when shipments were 2.1% lower. 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. A decrease in the number of goods and unsold inventories suggests, that demand is sound and vice versa. At the same time, a decrease in sales (shipments) suggests 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 official data at 12:30 GMT.

Daily and Weekly Pivot Levels

By employing the traditional calculation method, the daily pivot levels for USD/CAD are presented as follows:

Central Pivot Point – 1.2881
R1 – 1.2935
R2 – 1.3005
R3 – 1.3059

S1 – 1.2811
S2 – 1.2757
S3 – 1.2687

By using the traditional method of calculation again, the weekly pivot levels for USD/CAD are presented as follows:

Central Pivot Point – 1.3005
R1 – 1.3114
R2 – 1.3284
R3 – 1.3393

S1 – 1.2835
S2 – 1.2726
S3 – 1.2556