Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3375-1.3429. The pair closed at 1.3409, inching up 0.09% compared to Fridays close. It has been the 195th gain in the past 371 trading days and also a fifth consecutive one. The major pair appreciated 2.14% in October, following a 0.18% gain in September.
At 9:27 GMT today USD/CAD was edging down 0.13% on the day to trade at 1.3392. The pair touched a daily high at 1.3427 during early Asian trade, overshooting the range resistance level (R3), and a daily low at 1.3376 during the early phase of the European trading session.
On Tuesday USD/CAD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United States
Manufacturing PMI by Markit – final reading
The final estimate of the Manufacturing Purchasing Managers’ Index for October probably confirmed the preliminary reading of 53.2, according to the median forecast by analysts. It has been the highest reading since October 2015, supported by faster output and new business growth. In September, the final seasonally adjusted PMI stood at 51.5, inching up from a preliminary 51.4.
According to the preliminary report by Markit, ”Survey respondents cited an accelerated pace of new business growth and, in some cases, efforts to boost production in anticipation of stronger client demand in the months ahead.”
”Meanwhile, new export orders increased only slightly in October, but this was an improvement on the fractional decline seen during the previous survey period. Manufacturers mainly cited strong competition and relatively subdued demand patterns across key global markets.”
”Higher levels of incoming new work resulted in a greater degree of backlog accumulation across the manufacturing sector during October. The latest rise in unfinished work was the largest for 12 months. Some firms commented on increased capacity pressures at their plants, in part reflecting subdued job hiring in recent months. Latest data signaled only a moderate rise in payroll numbers, and the rate of expansion was weaker than in September”, Markit stated.
Values above the key level of 50.0 indicate predominant optimism (expanding activity). In case the final PMI for October outstripped market expectations, this would lead to a moderate bullish 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 expanded at a slightly faster pace in October, with the corresponding manufacturing PMI coming in at a reading of 51.7, according to market expectations. In September, the gauge rebounded from August’s seven-month low (49.4) to reach 51.5.
The New Orders Index came in at 55.1 in September, rebounding from 49.1 in August. The sub-gauge of production was reported at 52.8 in September, recovering from 49.6 in the preceding month. The index of employment improved to a value of 49.7 in September from 48.3 in the previous month. The gauge of prices was steady at 53.0 in September, which suggested higher prices of raw materials for a seventh straight month. In September, out of a total of 18 manufacturing industries, 7 reported an expansion, while 11 reported a contraction in overall business activity, according to the report by the Institute for Supply Management (ISM).
Readings above the key level of 50.0 are indicative of expanding activity in the sector of manufacturing. In case the PMI accelerated more than anticipated in October, this would have a strong bullish effect on the US dollar. The Institute for Supply Management is to release the official reading at 14:00 GMT.
Canada
Gross Domestic Product
Canadian real Gross Domestic Product (GDP) probably rose 0.2% in August compared to a month ago, according to the median forecast by experts. If so, it would be a third consecutive month of expansion. In July, Canada’s GDP was reported to have grown 0.5%.
In July, output in mining, quarrying and oil and gas extraction went up 3.9%, as production levels normalized after maintenance shutdowns in April and the Fort McMurray wildfire and evacuation in May. In addition, manufacturing output grew 0.4% during the same period, finance and insurance industry registered a 0.9% growth, transportation – 1.1%, retail trade – 0.3%, accommodation and food services – 1.4%, while utilities – 0.5%. On the other hand, Canada’s construction sector shrank for a fourth successive month in July, by 0.8%, according to the report by Statistics Canada.
In case the monthly GDP grew at a faster rate than projected in August, this would have a moderate-to-strong bullish effect on the Canadian Dollar. The official report is due out at 12:30 GMT.
RBC Manufacturing PMI
Activity in Canada’s manufacturing sector probably increased at a faster rate in October from a month ago. The corresponding Manufacturing Purchasing Managers’ Index probably rose to a reading of 52.0 in October, according to a forecast by Trading Economics.com, from 50.3 in the preceding month.
The gauge stood in the zone of expansion for a seventh consecutive month in September. However, it has been the slowest rate of expansion since February. In September, production volumes almost stagnated, while the sub-gauge of employment fell marginally. The sub-index of new orders dropped for the first time since February in September, in part due to a steeper decline in export sales. At the same time, input cost inflation has been the lowest so far this year.
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 headline PMI outpaced the analyst forecast in October, this would have a moderate bullish effect on the Canadian dollar. Royal Bank of Canada (RBC) is to release the official report at 13:30 GMT.
BoC Poloz speech
At 16:00 GMT Bank of Canada Governor, Stephen Poloz, is expected to speak in front of the Business Council of British Columbia. Any remarks in regard to Canada’s macroeconomic environment or the central bank’s monetary policy stance would heighten CAD volatility.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went up as high as 0.561% on October 31st, after which it closed at 0.553% to lose 1.5 basis points (0.015 percentage point) compared to October 28th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.861% on October 31st, after which it fell to 0.853% at the close to lose 0.004 percentage point compared to October 28th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.300% on October 31st from 0.289% on October 28th. The October 31st yield spread has been the largest one since October 27th, when the difference was 0.305%.
Daily, Weekly and Monthly Pivot Levels
By employing the Camarilla calculation method, the daily levels of importance for USD/CAD are presented as follows:
R1 – 1.3414
R2 – 1.3419
R3 (Range Resistance – Sell) – 1.3424
R4 (Long Breakout) – 1.3439
R5 (Breakout Target 1) – 1.3456
R6 (Breakout Target 2) – 1.3463
S1 – 1.3404
S2 – 1.3399
S3 (Range Support – Buy) – 1.3394
S4 (Short Breakout) – 1.3379
S5 (Breakout Target 1) – 1.3362
S6 (Breakout Target 2) – 1.3355
By using the traditional method of calculation, the weekly levels of importance for USD/CAD are presented as follows:
Central Pivot Point – 1.3370
R1 – 1.3461
R2 – 1.3526
R3 – 1.3617
R4 – 1.3709
S1 – 1.3305
S2 – 1.3214
S3 – 1.3149
S4 – 1.3085
In monthly terms, for USD/CAD we have the following pivots:
Central Pivot Point – 1.3283
R1 – 1.3560
R2 – 1.3711
R3 – 1.3988
R4 – 1.4265
S1 – 1.3132
S2 – 1.2855
S3 – 1.2704
S4 – 1.2553
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