Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.2931-1.3043. The pair closed at 1.2936, losing 0.67% compared to Tuesdays close. It has been the 129th drop in the past 283 trading days, a second consecutive one and also the steepest one since June 23rd. The daily low has been the lowest level since June 24th, when a low of 1.2715 was registered. The major pair has increased its slump to 0.90% so far in June, following a 4.31% surge in the prior month.

At 7:38 GMT today USD/CAD was edging up 0.32% on the day to trade at 1.2978. The pair touched a daily high at 1.2997 during the early phase of the European trading session, overshooting the upper range breakout level (R4), and a daily low at 1.2931 during early Asian trade.

Meanwhile, crude oil futures marked their 74th gain out of the past 138 trading days on June 29th. Oil for August delivery went up as high as $49.56 per barrel, or its highest price level since June 24th, and closed at $49.54, surging 3.53% compared to Tuesday’s close. As of 7:54 GMT today the commodity was edging down 0.26% to trade at $49.42, 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 24th, probably rose to 267 000, according to market consensus, from 259 000 in the preceding week. The latter has been the lowest number of claims since the business week ended on June 3rd, when an unrevised level of 264 000 was reported.

The 4-week moving average, an indicator lacking seasonal effects, was 267 000, marking a decrease by 2 250 compared to the preceding weeks unrevised average.

The business week, which ended on June 17th has been the 68th 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 increased further, this would have a moderate bearish effect on the US dollar.

The number of continuing jobless claims probably rose to the seasonally adjusted 2 150 000 during the business week ended on June 17th, according to the median forecast by experts, from 2 142 000 in the preceding week. The latter represented a drop by 20 000 compared to the revised up number of claims reported in the week ended on June 3rd. 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.

Chicago manufacturing activity barometer

The Chicago Purchasing Managers Index (PMI) probably returned to the zone of expansion in June, improving to a reading of 50.7, according to market expectations, from 49.3 during the prior month. The latter has been the lowest reading since February, when the PMI came in at 47.6. The index reflects business conditions in the regions manufacturing sector and is interrelated with the Manufacturing Index, published by the Institute for Supply Management (ISM). A reading above the key level of 50.0 is indicative of optimism (expansion in manufacturing activity). In case the PMI improved more than forecast, this would have a moderate bullish effect on the US dollar. The ISM-Chicago Inc. will release the official reading of this key barometer at 13:45 GMT.

Feds Bullard speech

At 17:30 GMT the Fed President for St. Louis and also a FOMC member, James Bullard, is expected to take a statement. Any remarks made in regard to the US macroeconomic outlook, or the Banks future policy stance, would certainly boost USD volatility, especially amid the overall uncertainty, following the stunning UK vote on EU membership.

Canada

Producer Prices

Prices of industrial products in Canada probably increased at a monthly rate of 0.4% in May, according to market expectations. In April prices were down 0.5%, which has marked the third consecutive period of decline. In April the main drag on producer prices came from prices of motorized and recreational vehicles (-2.1%), primary non-ferrous metal products (-2.8%), electrical, electronic, audiovisual and telecommunication products (-1.3%) and meat, fish, and dairy products (-0.1%). On the other hand, during the month prices were higher for energy and petroleum products (up 2.2% month-over-month).

This index measures the change in prices of industrial goods, sold by manufacturers in the country. It is also used as an indicator of commodity inflation. In case a larger-than-anticipated increase in prices is reported, this would have a limited bullish effect on the local dollar, as the latter tends to be sensitive to changes in commodity prices. Statistics Canada is to release the official data at 12:30 GMT.

Gross Domestic Product

Canadian real Gross Domestic Product (GDP) probably expanded 0.1% in April compared to a month ago, according to the median forecast by experts, following two consecutive months of contraction. In March Canadas GDP was reported to have shrank 0.2%.

In March, the largest slump was reported, or 2.8% was reported for mining, quarrying, and oil and gas extraction. The nations manufacturing output was 0.2% lower, while retail trade contracted 1.3%, according to the report by Statistics Canada.

In case the monthly GDP growth came in line with expectations or accelerated even more in April, this would have a moderate bullish effect on the Canadian Dollar. The official report is due out at 12:30 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.556% on June 29th, or the highest level since June 24th (0.627%), after which it closed at 0.550% to add 5.4 basis points (0.054 percentage point) compared to June 28th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.645% on June 29th, or the highest level since June 24th (0.755%), after which it fell to 0.637% at the close to add 2 basis points (0.02 percentage point) compared to June 28th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.087% on June 29th from 0.121% on June 28th. The June 29th yield spread has been the lowest one so far this year.