Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.3056-1.3144. The pair closed at 1.3096, edging up 0.15% on a daily basis. It has been the 56th gain in the past 108 trading days. The daily high has been the highest level since May 24th, when a high of 1.3191 was registered. The major pair has dipped 0.02% so far in June, following a 4.31% surge in the prior month. The latter has been the best monthly performance since July 2015.

At 7:24 GMT today USD/CAD was inching down 0.08% on the day to trade at 1.3085. The pair touched a daily high at 1.3107 during the early phase of the Asian trading session, overshooting the daily R1 level, and a daily low at 1.3083 at 7:23 GMT.

Meanwhile, crude oil futures marked their 65th gain out of the past 119 trading days on June 2nd. Oil for July delivery went up as high as $49.47 per barrel, or its highest price level since May 31st, and closed at $49.11, edging up 0.20% compared to Wednesday’s close. As of 7:35 GMT today the commodity was gaining 0.53% to trade at $49.37, after going up as high as $49.38 per barrel earlier.

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

Fundamentals

United States

Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings

Employers in all sectors of economy in the United States, excluding the farming industry, probably added 162 000 new jobs in May, according to the median forecast by experts, after a job gain of 160 000 in April. The latter has been the slowest growth rate since September 2015, when a revised down figure of 137 000 was reported.

Employment in professional and business services rose by 65 000 in April, in health care – by 44 000, in financial activities – by 20 000. At the same time, employment in the US mining sector shrank by 7 000 during the month, according to the report by the Bureau of Labor Statistics (BLS). Employment in other key industries such as construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, leisure and hospitality, and government remained little changed during the period.

Total non-farm payrolls account for 80% of the workers, who produce the entire Gross Domestic Product of the United States. Therefore, in case of a larger-than-expected gain in jobs in May, demand for the US dollar would be strongly supported.

Average Hourly Earnings probably increased 0.2% in May compared to the prior month, according to market expectations, following another 0.3% gain to USD 25.53 in April.

Meanwhile, the rate of unemployment in the country probably dropped to 4.9% in May, according to market expectations, from 5.0% in April. If expectations were met, this would be the lowest unemployment since February.

The total number of people unemployed was almost unchanged at 7.9 million in April, while more persons dropped out of the labor force. Among major groups, the unemployment rate for Hispanics rose to 6.1% during the period, while the rates for adult men (4.6%), adult women (4.5%), teenagers (16.0%), Whites (4.3%), Blacks (8.8%) and Asians (3.8%) remained almost without change.

The number of long-term unemployed (those looking for employment for 27 weeks or more) dropped by 150 000 to 2.1 million during April and comprised 25.7% of the unemployed, according to the BLS. At the same time, the number of persons in part-time employment for economic reasons (involuntary part-time workers) was little changed at 6.0 million in April.

In case the unemployment rate met expectations or even fell further in May, this would have a strong bullish effect on the greenback, because of the positive implications for consumer spending. The Bureau of Labor Statistics will release the official employment report at 13:30 GMT.

Balance of Trade

The deficit on US balance of trade probably widened to USD 41.30 billion in April, according to market expectations, from a deficit figure of USD 40.40 billion in March. The latter has been the smallest monthly trade deficit since February 2015, when a revised up gap of USD 35.89 billion was reported.

Total exports fell at a monthly rate of 0.87% in March to reach USD 176.6 billion. Exports of goods decreased USD 1.8 billion to reach USD 116.8 billion during the period, while exports of services went up USD 0.3 billion to reach USD 59.8 billion.

Total imports, at the same time, contracted at a monthly rate of 3.6% to reach USD 217.1 billion in March, or their lowest level since February 2011. Imports of goods were USD 7.9 billion lower to reach USD 175.3 billion during the period, while imports of services went down USD 0.2 billion to USD 41.7 billion.

In Q1, the average trade deficit shrank USD 1.4 billion, as imports fell USD 2.6 billion, while exports went down USD 1.2 billion.

In case the trade balance deficit widened more than anticipated, this would weigh on demand for the US Dollar, because of negative implications regarding economic growth. The Bureau of Economic Analysis will release the official trade data at 13:30 GMT.

Factory Orders

The total value of factory orders in the United States probably expanded 0.9% in April compared to March, according to the median estimate by experts, following a revised up 1.5% surge in the preceding month. The latter has been the steepest increase since June 2015. In March, orders for non-defense capital goods excluding aircraft, a gauge of business confidence and spending plans, shrank 0.8% compared to a 0.1% increase, as reported initially.

Excluding the sector of transportation, factory orders went up 0.8% in March from a month ago, while breaking a streak of four consecutive months 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 trigger a moderate bullish impulse for the US dollar, as it implies future growth acceleration. The US Census Bureau will release the official data at 14:00 GMT.

Non-Manufacturing PMI by the ISM

Activity in United States’ sector of services probably increased at a slightly lower pace in May from a month ago, with the corresponding non-manufacturing PMI coming in at a reading of 55.5, according to the median forecast by experts, down from a level of 55.7 in April. The latter has been the highest PMI reading since November 2015, when the gauge was reported at 55.9. If expectations were met, May would be the 77th 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 59.9 in April, up from a reading of 56.7 in the prior month. The Employment Index rose to 53.0 in April from 50.3 in March, while indicating a second consecutive period of expansion, according to data by the Institute for Supply Management (ISM). The Prices Index climbed to 53.4 in April from 49.1 in March, which indicated prices went up for the first time in the past 3 months. The Non-Manufacturing Business Activity Index decreased to 58.8 in April from a reading of 59.8 in March, indicating growth for an 81st straight month.

Among the 17 services industries, 13 reported growth and 4 reported contraction in activity in April.

In case the PMI slowed down more than anticipated in May, this would have a strong bearish effect on the US Dollar. The Institute for Supply Management (ISM) is to release the official reading at 14:00 GMT.

Canada

Balance of Trade

The deficit on Canadian balance of trade probably narrowed to CAD 2.45 billion in April, according to the median estimate by experts, following a deficit figure of CAD 3.4 billion in the preceding month.

In March total exports shrank at a monthly rate of 4.8% to reach CAD 41.0 billion, or a level unseen since January 2014. Exports of consumer goods dropped 4.6%, dragged down by pharmaceutical and medicinal products (down 7.4%), miscellaneous goods and supplies (down 9.5%), and other food products (down 4.3%). In addition, exports of motor vehicles and parts fell 6.0% in March, or for a second consecutive month, driven by declines in shipments of passenger cars and light trucks (down 6.6%) and exports of motor vehicle engines and motor vehicle parts (down 4.8%).

Canadas total imports shrank at a monthly rate of 2.4% to reach CAD 44.4 billion in March. Purchases of consumer goods dropped 4.6% month-over-month, dragged down by imports of miscellaneous goods and supplies (down 8.0%), furniture and fixtures (down 14.2%), and clothing, footwear and accessories (down 6.4%). Imports of aircraft and other transportation equipment and parts plummeted 20.4% during the period. On the other hand, purchases of energy products went up 13.5% in March.

In case Canadas trade deficit narrowed more than anticipated in April, this would have a moderate-to-strong bullish effect on the loonie, because of positive implications regarding 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 – 1.3104
R2 – 1.3112
R3 (range resistance) – 1.3120
R4 (range breakout) – 1.3144

S1 – 1.3088
S2 – 1.3080
S3 (range support) – 1.3072
S4 (range breakout) – 1.3048

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