Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.2742-1.2854. The pair closed at 1.2843, edging up 0.20% compared to Tuesdays close. It has been the 152nd gain in the past 278 trading days and also a second consecutive one. The daily high has been the highest level since June 20th, when a high of 1.2893 was registered. USD/CAD has gone down 2.34% so far in June, following a 4.31% surge in the prior month.

At 7:37 GMT today USD/CAD was losing 0.40% on the day to trade at 1.2792. The pair touched a daily high at 1.2845 during the early phase of the Asian trading session, undershooting the daily R1 level, and a daily low at 1.2784 at 7:23 GMT.

Meanwhile, crude oil futures marked their 71st gain out of the past 133 trading days on June 22nd. Oil for August delivery went up as high as $50.52 per barrel, or the highest price level since June 10th, and closed at $49.48, rising 1.29% compared to Tuesday’s close. As of 7:44 GMT today the commodity was edging down 0.24% to trade at $49.36, after going down as low as $49.12 per barrel earlier.

On Thursday USD/CAD trading may be influenced by the following macroeconomic reports and other events as listed below.

Fundamentals

United States

Initial, Continuing Jobless Claims

The number of people in the United States, who filed for unemployment assistance for the first time during the business week ended on June 17th, probably dropped to 270 000, according to market consensus, from 277 000 in the preceding week. The latter has been the highest number of claims since the business week ended on May 13th, when an unrevised level of 278 000 was reported.

The 4-week moving average, an indicator lacking seasonal effects, was 269 250, marking a decrease by 250 compared to the preceding weeks unrevised average.

The business week, which ended on June 10th has been the 67th consecutive week, when jobless claims stood below the 300 000 threshold, which suggested a healthy labor market. It has been the longest streak in 43 years.

Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or decreased further, this would have a moderate bearish effect on the US dollar.

The number of continuing jobless claims probably dropped to the seasonally adjusted 2 150 000 during the business week ended on June 10th, according to the median forecast by experts, from 2 157 000 in the preceding week. The latter represented an increase by 45 000 compared to the revised up number of claims reported in the week ended on May 27th. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago.

The US Department of Labor is to release the weekly report at 12:30 GMT.

Manufacturing PMI by Markit – preliminary reading

Manufacturing activity in the United States probably increased at a faster rate in June, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 50.8, according to market expectations. In May the final seasonally adjusted PMI stood at 50.7, improving from a preliminary 50.5.

According to Markits statement: ”Lower production levels were the main downward influence on the headline PMI in May. Although only marginal, this was the first overall reduction in manufacturing output recorded by the survey for more than six-and-a-half years. Anecdotal evidence suggested that softer new order growth and efforts to rein in inventory accumulation had exerted negative influences on production schedules.”

”A slower upturn in new orders enabled another reduction in backlogs of work during May. Despite little sign of pressure on operating capacity, the latest survey signaled a marginal rise in payroll numbers and the rate of jobs growth picked up slightly from April’s near three-year low. Additional staff hiring was linked to new product launches and longer-term expansion plans.”

”Manufacturers continued to report cautious inventory strategies during May, leading to a fall in stocks of purchases for the sixth month running. Post-production inventories rose slightly, but this was partly linked to weaker than expected sales.”

Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a better-than-anticipated performance, this would have a moderate bullish effect on the US dollar. The preliminary PMI reading by Markit Economics is due out at 13:45 GMT.

New Home Sales

Sales of new single-family homes probably decreased 8.7% to the seasonally adjusted annual rate of 560 000 in May, according to market expectations, from 619 000 reported in April. The latter has been the highest level since January 2008. Sales in the Northeast soared 52.8% to 55 000, those in the West rose 18.8% to reach 152 000, while sales in the South climbed 15.8% to 352 000 in April. On the other hand, new home sales in the Midwest dropped 4.8% to reach 60 000 during the same month.

The median sales price of new houses sold went up as high as USD 321 100 in April, after being at USD 297 900 in the preceding month. The average sales price rose to USD 379 800 in April from USD 353 900 in March. At the end of the month, the seasonally adjusted estimate of new houses for sale was 243 000. It represents a supply of 4.7 months at the current sales rate, or the lowest since February 2015, according to the report by the US Census Bureau.

In case the index decreased more than anticipated, this would have a strong bearish effect on the US Dollar. The Census Bureau is to report the official figure at 14:00 GMT.

Feds Kaplan statement

At 23:00 GMT the Federal Reserve President for Dallas and also a FOMC member, Robert Kaplan, is expected to take a statement. Any remarks on the US macroeconomic outlook or monetary policy may increase USD volatility.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.606% on June 22nd, after which it closed at 0.598% to lose 1 basis point (0.01 percentage point) compared to June 21st.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.767% on June 22nd, after which it fell to 0.755% at the close to lose 1.2 basis points (0.012 percentage point) compared to June 21st.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, fell to 0.157% on June 22nd from 0.159% on June 21st. The June 22nd yield spread has been the lowest one since May 5th, when the difference was 0.149%.