Forex Market: USD/CAD trading outlook for Thursday (December 1st 2016)

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3357-1.3465. The pair closed at 1.3429, inching down 0.06% compared to Tuesdays close. It has been the 185th drop in the past 393 trading days. The daily low has been a level not seen since November 9th, when a low of 1.3264 was registered. The major pair added 0.15% to its value in November, following a 2.14% surge in October.

At 8:22 GMT today USD/CAD was edging down 0.15% on the day to trade at 1.3409. The pair touched a daily high at 1.3441 during early Asian trade, overshooting the daily R1 level, and a daily low at 1.3378 during the early phase of the European trading session.

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

Fundamentals

United States

Fed’s Mester speech

At 13:30 GMT the Fed President for Cleveland, Loretta Mester, is to attend the Office of Financial Researchs Financial Stability Conference in Washington, D.C.

Economic outlook or monetary policy-related remarks would heighten USD volatility.

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 November 25th, probably rose to 253 000, according to market consensus, from 251 000 in the preceding week.

The 4-week moving average, an indicator lacking seasonal effects, was 251 000, marking a decrease by 2 000 compared to the preceding week’s revised down average.

The business week, which ended on November 18th, has been the 90th consecutive week, when jobless claims stood below the 300 000 threshold, which suggested a healthy labor market. It has been the longest streak since 1970.

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 dropped to the seasonally adjusted 2 040 000 during the business week ended on November 18th, according to the median forecast by experts, from 2 043 000 in the preceding week. The latter represented an increase by 60 000 compared to the revised up number of claims reported in the week ended on November 4th. 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 13:30 GMT.

Manufacturing PMI by Markit – final reading

The final estimate of the Manufacturing Purchasing Managers’ Index for November probably confirmed the preliminary reading of 53.9, 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 October, the final seasonally adjusted PMI stood at 53.4, inching up from a preliminary 53.2.

According to the preliminary report by Markit, ”New order growth picked up to its fastest for 13 months in November. Anecdotal evidence suggested that increased sales to domestic clients had driven the latest upturn in new work. Meanwhile, new export orders rose only marginally, which manufacturers linked to competitive pressures and the strong dollar in particular.”

”The latest survey revealed a robust expansion of input buying among manufacturing companies, which contrasted with the subdued purchasing trends seen during the first half of 2016. This partly reflected continued efforts to rebuild inventories. November’s survey marked the first back-to-back upturn in pre-production stocks since late-2015”, Markit stated.

Values above the key level of 50.0 indicate predominant optimism (expanding activity). In case the final PMI for November outstripped market expectations, this would lead to a moderate bullish impact on the US dollar. The final reading is due out at 14:45 GMT.

Manufacturing PMI by the ISM

Activity in United States’ manufacturing sector probably expanded at a slightly faster pace in November, with the corresponding manufacturing PMI coming in at a reading of 52.2, according to market expectations. In October, the gauge was reported at 51.9, which marked a second consecutive month of expansion.

The New Orders Index came in at 52.1 in October, slowing down from 55.1 in September. The sub-gauge of production was reported at 54.6 in October, accelerating from 52.8 in the preceding month. The index of employment improved to a value of 52.9 in October from 49.7 in the previous month. The gauge of prices rose to 54.5 in October from 53.0 in September, which suggested higher prices of raw materials for an 8th straight month. In October, out of a total of 18 manufacturing industries, 10 reported an expansion, while 8 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 November, this would have a strong bullish effect on the US dollar. The Institute for Supply Management is to release the official reading at 15:00 GMT.

Canada

RBC Manufacturing PMI

Activity in Canada’s manufacturing sector probably increased at a faster rate in November from a month ago. The corresponding Manufacturing Purchasing Managers’ Index probably rose to a reading of 51.9 in November, according to a forecast by Trading Economics.com, from 51.1 in the preceding month.

The gauge stood in the zone of expansion for an 8th consecutive month in October.

In case the headline PMI outpaced the analyst forecast in November, this would have a moderate bullish effect on the Canadian dollar. Royal Bank of Canada (RBC) is to release the official report at 14:30 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went up as high as 0.711% on November 30th, after which it closed at 0.703% to add 2.9 basis points (0.029 percentage point) compared to November 29th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 1.135% on November 30th, after which it fell to 1.131% at the close to add 4 basis points (0.04 percentage point) compared to November 29th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.428% on November 30th from 0.417% on November 29th. The November 30th yield spread has been the largest one since November 28th, when the difference was 0.440%.

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 – 1.3439
R2 – 1.3449
R3 (Range Resistance – Sell) – 1.3459
R4 (Long Breakout) – 1.3488
R5 (Breakout Target 1) – 1.3523
R6 (Breakout Target 2) – 1.3538

S1 – 1.3419
S2 – 1.3409
S3 (Range Support – Buy) – 1.3400
S4 (Short Breakout) – 1.3370
S5 (Breakout Target 1) – 1.3335
S6 (Breakout Target 2) – 1.3320

By using the traditional method of calculation, the weekly levels of importance for USD/CAD are presented as follows:

Central Pivot Point – 1.3479
R1 – 1.3581
R2 – 1.3638
R3 – 1.3740
R4 – 1.3841

S1 – 1.3422
S2 – 1.3320
S3 – 1.3263
S4 – 1.3205

In monthly terms, for USD/CAD we have the following pivots:

Central Pivot Point – 1.3428
R1 – 1.3591
R2 – 1.3754
R3 – 1.3917
R4 – 1.4081

S1 – 1.3265
S2 – 1.3102
S3 – 1.2939
S4 – 1.2777