Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.3003-1.3089. The pair closed at 1.3077, going up 0.50% on a daily basis. It has been the 35th gain in the past 65 trading days and also a third consecutive one. USD/CAD has advanced 0.74% so far during the current month, following two straight months of decline.

At 6:56 GMT today USD/CAD was edging up 0.16% on the day to trade at 1.3098. The pair touched a daily high at 1.3111 during mid-Asian trade, overshooting the range resistance level (R3), and a daily low at 1.3068 during the early phase of the Asian trading session.

Meanwhile, crude oil futures continued to retreat on April 4th. Monday marked the 38th drop in oil prices out of the past 76 trading days. Oil futures for May delivery went down as low as $35.39 per barrel on April 1st, or the lowest level since March 4th, and closed at $35.42, plummeting 3.66% on the day. As of 7:02 GMT today the commodity was edging down 0.06% to trade at $35.40, after going down as low as $35.28 per barrel earlier.

On Tuesday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.

Fundamentals

United States

Balance of Trade

The deficit on US balance of trade probably widened to USD 46.20 billion in February, according to market expectations. If so, it would be the largest monthly trade deficit since August 2015, when a revised up gap of USD 48.00 billion was reported. In January the trade gap was reported at USD 45.68 billion, as exports dropped at the steepest rate in six months, while imports returned to contraction.

Total exports decreased at a monthly rate of 2.1% in January to reach USD 176.46 billion, or a level unseen in at least 5.5 years. Exports of goods fell USD 4.0 billion to reach USD 116.9 billion in January, while exports of services went up USD 0.2 billion to USD 59.6 billion during the same month.

Total imports, at the same time, shrank at a monthly rate of 1.3% to reach USD 222.13 billion in January. Imports of goods were USD 2.9 billion lower to reach USD 180.6 billion, while imports of services rose less than USD 0.1 billion to USD 41.5 billion.

In case the trade deficit widened more than anticipated, this would have a strong bearish effect on the US dollar, because of negative implications regarding economic growth. The Bureau of Economic Analysis will release the official trade data at 12:30 GMT.

Services PMI by Markit – final reading

The final Services Purchasing Managers Index probably confirmed the preliminary value for March at 51.0, reported on March 24th. In February the final seasonally adjusted index stood at 49.7, inching down from a preliminary reading of 49.8. It has been the lowest reading since October 2013, when the gauge stood at 49.3. The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT and hotels and restaurants. Values above the key level of 50.0 indicate optimism (expanding activity). In case a larger-than-projected improvement in services sector activity was reported, this would have a moderate bullish effect on the US dollar. The final data by Markit Economics is due out at 13:45 GMT.

Non-Manufacturing PMI by the ISM

Activity in United States’ sector of services probably increased at a faster pace in March, with the corresponding non-manufacturing PMI coming in at a reading of 54.0, according to the median forecast by experts, up from a level of 53.4 in February. The latter has been the lowest PMI reading since February 2014, when a level of 51.6 was reported. If expectations were met, March would be the 75th consecutive month, when the gauge stood in the area above 50.0. The PMI is a compound index, based on the values of four equally-weighted components, which comprise it. These sub-indexes reflect seasonally adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and supplier deliveries.

The New Orders Index stood at 55.5 in February, down from a reading of 56.5 in the prior month. The Employment Index tumbled to 49.7 in February from 52.1 in January, while marking the first contraction in the past 24 months, according to data by the Institute for Supply Management (ISM). The Prices Index fell to 45.5 in February from 46.4 in January, which indicated prices declined in February for a fourth time in the past six months. The Non-Manufacturing Business Activity Index advanced to 57.8 in February from 53.9 in January, indicating growth for a 79th straight month.

Among the 17 services industries, 14 reported growth and 3 reported contraction in activity in February.

In case the index accelerated at a steeper rate than anticipated, this would have a strong bullish effect on the US dollar. The Institute for Supply Management (ISM) is to release the official PMI reading at 14:00 GMT.

Canada

Balance of Trade

The deficit on Canadian balance of trade probably widened to CAD 1.00 billion in February, according to the median estimate by experts, following a deficit figure of CAD 0.66 billion in the preceding month. If expectations were met, Februarys gap would be the largest one since November, when a revised up deficit of CAD 1.59 billion was reported.

In January total exports grew at a monthly rate of 1.0% to reach a record level of CAD 46.0 billion. Exports of consumer goods went up 13.7%, supported by miscellaneous goods and supplies (up 52.3%) and pharmaceutical and medicinal products (up 30.9%). In addition, exports of motor vehicles and parts rose 7.2% month-over-month, supported by shipments of passenger cars and light trucks (up 5.9%). On the other hand, exports of aircraft and other transportation equipment and parts shrank 35.2% in January, while exports of energy products went down at a monthly rate of 7.7%.

Canadas total imports shrank at a monthly rate of 1.1% to reach CAD 46.7 billion in January. Purchases of motor vehicles and parts rose 3.3% to reach a record level of CAD 9.0 billion, supported by motor vehicle engines and motor vehicle parts (up 8.2%). In addition, imports of consumer goods were 1.8% higher, driven by pharmaceutical and medicinal products (up 2.7%), meat products (up 9.4%), and clothing, footwear and accessories (up 2.2%).

In case the trade balance deficit widened more than expected, this would have a strong bearish effect on the Canadian dollar, due to negative implications in regard to economic growth. Statistics Canada will release the official trade data at 12:30 GMT.

Daily and Weekly Pivot Levels

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

R1 – 1.3085
R2 – 1.3093
R3 (range resistance) – 1.3101
R4 (range breakout) – 1.3124

S1 – 1.3069
S2 – 1.3060
S3 (range support) – 1.3053
S4 (range breakout) – 1.3030

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

Central Pivot Point – 1.3051
R1 – 1.3245
R2 – 1.3478
R3 – 1.3672

S1 – 1.2818
S2 – 1.2624
S3 – 1.2391