Yesterday’s trade saw USD/CAD within the range of 1.3018-1.3135. The pair closed at 1.3075, going up 0.21% on a daily basis. It has been the 55th gain in the past 106 trading days and also a third consecutive one. The daily high has been an exact test of the high from May 25th. The major pair advanced 4.16% in May, rebounding after three consecutive months of decline.
At 7:24 GMT today USD/CAD was edging up 0.15% on the day to trade at 1.3094. The pair touched a daily high at 1.3095 at 7:22 GMT, testing the daily R2 level, and a daily low at 1.3053 during early Asian trade.
Canadian dollar continued to lose ground against its US counterpart, as crude oil futures tested the lows from last Friday. May 31st marked the 53rd drop in crude oil prices out of the past 117 trading days and also the steepest one since May 19th. Oil for July delivery went down as low as $48.77 per barrel on May 31st and closed at $48.92, tumbling 1.19% compared to Monday’s close. As of 7:29 GMT today the commodity was edging down 0.55% to trade at $48.65, after going down as low as $48.55 per barrel earlier. The latter has been the lowest price level since May 24th.
On Wednesday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Manufacturing PMI by Markit – final reading
The final estimate of the Manufacturing Purchasing Managers Index for May probably confirmed the preliminary reading of 50.5, according to the median forecast by analysts. It has been the lowest PMI reading since September 2009. In April the final seasonally adjusted PMI stood at 50.8, confirming the preliminary reading.
According to the preliminary report by Markit, ”A renewed fall in production was one key factor weighing on the headline index in May, alongside softer new order growth and further cuts to stocks of inputs. U.S. manufacturers signalled the first reduction in output since September 2009 in May, although the rate of decline was only marginal. A number of monitored firms mentioned that uncertainty around the general economic outlook had caused clients to delay spending decisions, which in turn prompted firms to trim their production schedules.”
”Softer client demand was highlighted by a further slowdown in new business growth in May. Furthermore, the latest expansion in new order books was the weakest seen in 2016 so far. Data indicated that reduced foreign client demand had underpinned slower growth in overall new orders. New export sales fell for the second month in a row, though the rate of reduction softened since April”, Markit stated.
Values above the key level of 50.0 indicate predominant optimism (expanding activity). In case the final PMI for May came in line with expectations or slowed down even further, this would lead to a moderate bearish impact on the US dollar. The final reading is due out at 13:45 GMT.
Manufacturing PMI by the ISM
Activity in United States’ manufacturing sector probably increased at a slower pace in May, with the corresponding manufacturing PMI coming in at a reading of 50.4, according to market expectations, down from 50.8 in April. If so, this would be the third consecutive month of expansion, which followed four successive months of contraction. A larger slowdown than projected would have a strong bearish effect on the dollar. The ISM is to release the official figure at 14:00 GMT.
Feds ”Beige Book” report
At 18:00 GMT the Federal Reserve is to release its ”Beige Book” report. It is published eight times during the year. Each of the banks in the 12 Federal Reserve Districts gathers data in regard to current economic situation in the country on the basis of interviews with key business contacts, economists, market experts, and other sources. In case the Beige Book presents an optimistic economic outlook, this will usually support the greenback, while a pessimistic view will have a bearish effect on the currency.
Canada
RBC Manufacturing PMI
At 13:30 GMT Royal Bank of Canada (RBC) is to report on manufacturing activity in May. The corresponding Manufacturing Purchasing Managers Index stood in the zone of expansion for a second straight month in April, coming in at a reading of 52.2. It has been the highest level since December 2014, when a reading of 53.9 was reported. The Manufacturing PMI stood at 51.5 in March.
The PMI report is based on data collected from monthly replies to questionnaires sent to supply managers in over 400 industrial companies. The PMI is a compound index based on five individual indexes: new orders, production, employment, delivery time, stocks of purchases. Values of the index above the key level of 50.0 indicate overall increase in activity in the sector, while readings below 50.0 are indicative of contraction in activity. PMIs are earlier indicators of economic conditions published on a monthly basis and are available much before the publication of relevant data from government authorities. This way they provide an earlier insight about economic development trends.
In case the gauge continued to improve in May, this would have a moderate bullish effect on the Canadian dollar.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.3086
R2 – 1.3096
R3 (range resistance) – 1.3107
R4 (range breakout) – 1.3139
S1 – 1.3064
S2 – 1.3054
S3 (range support) – 1.3043
S4 (range breakout) – 1.3011
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.3039
R1 – 1.3170
R2 – 1.3322
R3 – 1.3453
S1 – 1.2887
S2 – 1.2756
S3 – 1.2604
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