Forex Market: USD/CAD daily trading outlook

Friday’s trade saw USD/CAD within the range of 1.3963-1.4111. The pair closed at 1.3973, losing 0.40% on a daily basis. It has been the 7th drop in the past 19 trading days and also a fourth consecutive one. In weekly terms, USD/CAD lost 1.02% of its value last week, while extending the drop in the week ended on January 24th. The pair has added 0.96% in January, while marking its 8th gain in the past 9 months, but yet, the slowest one since August 2015.

At 9:50 GMT today USD/CAD was gaining 0.40% for the day to trade at 1.4030. The pair touched a daily high at 1.4056 at 9:13 GMT, overshooting the upper range breakout level (R4), and a daily low at 1.3970 during the early phase of the Asian trading session.

Canada’s dollar remained supported, as crude oil prices surged for a fourth straight day on Friday. Oil futures for March delivery went up as high as $34.40 per barrel on January 29th and closed at a level of $33.62 to mark their 16th gain in the past 31 trading days. As of 9:54 GMT today the commodity was down 1.61% on a daily basis to trade at $33.10 per barrel, after going down as low as $32.71 earlier. Oil lost 9.19% of its value in January to mark its fourth drop in the past five months and also the third successive one.

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

Fundamentals

United States

Personal Spending, Personal Income

Personal spending in the United States probably rose for an 8th straight month in December, up 0.1%, according to market expectations, while personal income was probably up for a 9th consecutive month in December, increasing at a monthly rate of 0.2%. Consumer spending, which accounts for over two thirds of the nations GDP, rose 0.3% in December, or at the fastest rate since August 2015.

At the same time, personal income increased 0.3% during the same month, while disposable personal income (DPI) rose USD 34.5 billion (or 0.3% as well). Private wages and salaries were up by USD 34.4 billion in November, compared to an increase by USD 45.7 billion in the prior month. Government wages and salaries were USD 2.8 billion higher in November, compared to an increase by USD 1.5 billion in October.

Higher-than-expected rates of increase imply good employment conditions and, therefore, are dollar positive. The Bureau of Economic Analysis is to publish the official figures at 13:30 GMT.

Manufacturing PMI by Markit – final reading

The final estimate of the Manufacturing Purchasing Managers Index for January probably confirmed the flash estimate of 52.7, which was reported on January 22nd. In December the final seasonally adjusted PMI stood at 51.2, inching down from a preliminary value of 51.3.

According to the preliminary report by Markit, ”…the pace of expansion was comfortably above the 26-month low recorded in December. Survey respondents mainly commented on higher output levels in response to positive new business trends and expectations of improving domestic demand over the months ahead.”

”Volumes of new work strengthened in January, after coming close to stagnation at the end of 2015. The latest increase in new orders was the fastest for three months. However, new export sales continued to rise at only a marginal pace, which manufacturers generally linked to the strong dollar. Companies that reported an overall upturn in new work mostly cited improving domestic economic conditions. The main exception to the wider trend was among manufacturers facing cutbacks in new orders from clients in the oil and gas sector”, Markit stated.

Values above the key level of 50.0 indicate optimism (expanding activity). In case the final PMI for January confirmed or came above the preliminary reading, this would cause 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 improved in January, with the corresponding manufacturing PMI coming in at a reading of 48.5, according to expectations, up from 48.2 in December. The latter has been the lowest PMI reading since June 2009, when the gauge was reported at 44.8.

The New Orders Index came in at 49.2 in December, up from 48.9 in November. The sub-gauge of production was reported at 49.8, advancing from 49.2 in November. The index of employment slid to a value of 48.1 in December from 51.3 in the preceding month. The gauge of prices was at 33.5 in December, down from 35.5 in November, which suggested lower prices of raw materials for a 14th month in a row. In December, 6 manufacturing industries reported growth, 10 reported contraction and 2 registered no change in conditions, according to the report by the Institute for Supply Management (ISM).

In case the manufacturing PMI improved more than anticipated in January, this would have a moderate-to-strong bullish effect on the US dollar. The ISM is to release the official index reading at 15:00 GMT.

Canada

RBC Manufacturing PMI

At 14:30 GMT Royal Bank of Canada (RBC) is to report on manufacturing activity in January. The corresponding Manufacturing Purchasing Managers Index stood in the zone of contraction for the fifth straight month in December, coming in at a reading of 47.5. It has been the lowest level ever recorded, as gauges of output, new orders and employment showed a weak performance. The Manufacturing PMI stood at 48.6 in November.

In case the index rebounded in January, this would have a moderate bullish effect on the Canadian dollar.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:

R1 – 1.3987
R2 – 1.4000
R3 (range resistance) – 1.4015
R4 (range breakout) – 1.4054

S1 – 1.3959
S2 – 1.3946
S3 (range support) – 1.3932
S4 (range breakout) – 1.3892

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

Central Pivot Point – 1.4082
R1 – 1.4218
R2 – 1.4463
R3 – 1.4599

S1 – 1.3837
S2 – 1.3701
S3 – 1.3456