Forex Market: CAD/MXN daily trading forecast

Yesterday’s trade saw CAD/MXN within the range of 11.9359-11.9859. The pair closed at 11.9776, gaining 0.01% on a daily basis.

At 7:08 GMT today CAD/MXN was up 0.05% for the day to trade at 11.9812. The pair touched a daily high at 11.9908 at 5:55 GMT.

Fundamental view

Canada

The annualized index of consumer prices (CPI) in Canada probably slowed down to 2.3% in July, according to market expectations, from 2.4% in June and matching the rate in May, which has been the highest in 27 months. In monthly terms, the CPI probably fell 0.1% last month, following a 0.1% gain in June.

Key categories in Canadian CPI basket are Shelter (accounting for 27.5% of the total weight) and Transportation (19.3%). Other categories include Food (with a 16.1% share), Household Operations, Furnishings and Equipment (11.8%), Recreation, Education and Reading (11.8%), Clothing and Footwear (5.7%), Health and Personal Care (5%), while Alcoholic Beverages and Tobacco Products comprise the remaining 3%.

Bank of Canadas (BoC) annualized Core CPI, which excludes prices of fruits, vegetables, gasoline, fuel oil, natural gas, mortgages, intercity transportation, and tobacco products, probably accelerated to 1.9% in July from 1.8% in the prior month. This is the key measure of inflation, on which the central bank bases its decisions regarding monetary policy. In case Core CPI increased more than projected, but still remained within BoC inflation range target (1-3%), this would support demand for the loonie, as Canadian dollar is also known. The official CPI report by Statistics Canada is due out at 12:30 GMT.

Retail sales in the country probably increased 0.3% in June on a monthly basis, according to the median forecast by experts. In May sales rose 0.7%. Retail sales, excluding sales of automobiles, probably expanded 0.3% in June, following a 0.1% gain in the preceding month. Large-ticket purchases are excluded due to their high volatility, which could influence the general trend. In case retail sales increased more than anticipated, this would support the Canadian dollar. Statistics Canada is to release the official figure at 12:30 GMT.

Mexico

The rate of unemployment in Mexico probably climbed to 5.0% during July, according to the median forecast by experts. In June the rate was 4.8% and in May – 4.92%, which has been the highest rate since January. It represents the percentage of the eligible work force that is unemployed, but is actively seeking employment. The rate of unemployment also reflects overall economic state in the country, as there is a strong correlation between consumer spending levels and labor market conditions. High rates of unemployment are accompanied by weaker spending, which causes an adverse effect on corporate profits and also leads to overall growth deceleration. Therefore, in case the rate of unemployment rose more than expected, this would have a bearish effect on the local currency. Instituto Nacional de Estadística y Geografía is to announce the official rate at 13:00 GMT.

Technical view

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 11.9665. In case CAD/MXN manages to breach the first resistance level at 11.9970, it will probably continue up to test 12.0165. In case the second key resistance is broken, the pair will probably attempt to advance to 12.0470.

If CAD/MXN manages to breach the first key support at 11.9470, it will probably continue to slide and test 11.9165. With this second key support broken, the movement to the downside will probably continue to 11.8970.

The mid-Pivot levels for today are as follows: M1 – 11.9068, M2 – 11.9318, M3 – 11.9568, M4 – 11.9818, M5 – 12.0068, M6 – 12.0318.

In weekly terms, the central pivot point is at 12.0134. The three key resistance levels are as follows: R1 – 12.0757, R2 – 12.1513, R3 – 12.2136. The three key support levels are: S1 – 11.9378, S2 – 11.8755, S3 – 11.7999.