Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.2461-1.2732. The pair closed at 1.2702, surging 1.38% on a daily basis. It has been the 43rd gain in the past 86 trading days and also the sharpest daily move since July 15th 2015, when USD/CAD advanced 1.49%. The daily high has been the highest level since April 22nd, when a high of 1.2760 was registered. The major pair has appreciated 1.23% so far during the current month, following three consecutive months of decline. In April it went down 3.48%.

At 7:15 GMT today USD/CAD was inching up 0.06% on the day to trade at 1.2709. The pair touched a daily high at 1.2748 during the early phase of the Asian trading session, undershooting the daily R2 level, and a daily low at 1.2697 during early Asian trade as well.

The loonie distanced from recent 10-month highs, as crude oil futures retreated from 6-month highs on Tuesday. May 3rd marked the 45th drop in oil prices out of the past 97 trading days. Oil futures for June delivery went down as low as $43.32 per barrel on May 3rd, and closed at $43.85, losing 2.08% compared to Monday’s close. As of 7:20 GMT today the commodity was edging down 0.11% to trade at $43.80, after going down as low as $43.54 per barrel earlier.

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

Fundamentals

United States

Employment Change by ADP

Employers in the US non-farm private sector probably added 195 000 new jobs during April, according to the median estimate by experts, following 200 000 new positions added in March.

Employment in the service-providing segment of the economy increased by 191 000 in March, while employment in the goods-producing sector rose by 9 000 positions. Business activities added 28 000 job positions, construction – 17 000, trade, transportation and utilities – 42 000, financial activities – 14 000 and manufacturing – 3 000 positions.

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 governments 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 the US economic growth. In case new jobs growth outpaced expectations, this would have a moderate-to-strong bullish effect on the US dollar. The official figure is scheduled to be released at 12:15 GMT.

Balance of Trade

The deficit on US balance of trade probably narrowed to USD 41.50 billion in March, according to market expectations, from a deficit figure of USD 47.06 billion in February. The latter has been the largest monthly trade deficit since August 2015, when a revised up gap of USD 48.00 billion was reported.

Total exports rose at a monthly rate of 1.0% in February to reach USD 178 billion. Exports of goods rose USD 1.8 billion to reach USD 118.6 billion in February, while exports of services edged down less than USD 0.1 billion to reach USD 59.5 billion during the same month.

Total imports, at the same time, expanded at a monthly rate of 1.3% to reach USD 222.5 billion in February. Imports of goods were USD 2.7 billion higher to reach USD 183.3 billion during the period, while imports of services rose USD 0.3 billion to USD 41.8 billion.

US exports to the EU climbed 10.2%, those to Canada were up 6.0% and those to Mexico went up 0.9% in February. On the other hand, exports to China decreased 2.0% month-over-month.

Year-to-date, US trade deficit widened 13.1% (USD 10.8 billion) compared to the same period a year ago.

In case the trade gap narrowed more than anticipated in March, this would strongly support demand for the US dollar, because of the positive implications in regard to US growth. The Bureau of Economic Analysis will release the official trade data at 12:30 GMT.

Non-Manufacturing PMI by the ISM

Activity in United States’ sector of services probably increased at a faster pace in April from a month ago, with the corresponding non-manufacturing PMI coming in at a reading of 54.9, according to the median forecast by experts, up from a level of 54.5 in March. If expectations were met, April would be the 76th consecutive month, when the gauge stood in the area above 50.0. It would also be the highest PMI reading this year. 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 56.7 in March, up from a reading of 55.5 in the prior month. The Employment Index rose to 50.3 in March from 49.7 in February, while indicating the 25th period of expansion out of the past 26 months, according to data by the Institute for Supply Management (ISM). The Prices Index climbed to 49.1 in March from 45.5 in February, which indicated prices declined for a fifth time in March out of the past seven months. The Non-Manufacturing Business Activity Index advanced to 59.8 in March from a reading of 57.8 in February, indicating growth for an 80th straight month.

Among the 17 services industries, 12 reported growth, 2 reported contraction in activity and 3 reported no change in business conditions in March.

In case the Non-Manufacturing PMI accelerated at a sharper 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.

Factory Orders

Factory orders in the United States probably expanded 0.6% in March compared to February, according to the median estimate by experts, following a 1.7% contraction in the preceding month. Orders for durable goods shrank 3% in March, orders for non-durable goods fell 0.4%, while transport equipment dropped 6.2%.

Excluding the sector of transportation, factory orders went down 0.8% in February from a month ago, while marking their fourth consecutive month of decline.

The general index reflects the total value of new purchase orders, placed at manufacturers for durable and non-durable goods, and can provide insight into inflation and growth in the US sector of manufacturing. In case the general index of new orders increased at a faster-than-anticipated rate, this would have a moderate bullish effect on the US dollar, as it implies future growth acceleration. The US Census Bureau will release the official data at 14:00 GMT.

Canada

Balance of Trade

The deficit on Canadian balance of trade probably narrowed to CAD 1.45 billion in March, according to the median estimate by experts, following a deficit figure of CAD 1.91 billion in the preceding month. The latter has been the largest trade gap since October 2015, when a revised up deficit of CAD 2.49 billion was reported.

In case the trade balance deficit shrank more than expected in March, this would have a strong bullish effect on the Canadian dollar, due to the positive implications regarding Canadas 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 – 1.2727
R2 – 1.2752
R3 (range resistance) – 1.2777
R4 (range breakout) – 1.2851

S1 – 1.2677
S2 – 1.2652
S3 (range support) – 1.2627
S4 (range breakout) – 1.2553

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

Central Pivot Point – 1.2589
R1 – 1.2682
R2 – 1.2812
R3 – 1.2905

S1 – 1.2459
S2 – 1.2366
S3 – 1.2236