Forex Market: CAD/MXN daily trading forecast

Yesterday’s trade saw CAD/MXN within the range of 11.9825-12.0990. The pair closed at 12.0891, gaining 0.49% on a daily basis.

At 8:35 GMT today CAD/MXN was down 0.08% for the day to trade at 12.0837. The pair touched a daily low at 12.0759 at 8:05 GMT.

Fundamental view

Canada

Employment

The number of the employed people in Canada probably increased by 10 000 last month compared to July, according to market expectations. In July compared to June the number of the employed rose by 41 700, or the most since March. Creation of new job positions is considered of utmost importance for consumer spending. In case employment in the country increased more than expected, the loonie would be supported.

The rate of unemployment in the country probably remained unchanged at 7.0% in August. Lower than expected unemployment would have a bullish effect on Canadian dollar. Statistics Canada is expected to release its official report at 12:30 GMT.

Ivey Purchasing Managers Index

Activity among purchasing managers in Canada probably increased in August, with the correspoding seasonally adjusted PMI coming in at a reading of 55.3. In July the index stood at 54.1, or the highest level since April. This indicator is based on a survey sponsored by Richard Ivey School of Business and Canadian Purchasing Management Association. It encompasses 175 respondents in both the public and the private sector, selected in accordance with their geographic location and activity, so that the entire economy is covered. Activity among purchasing managers is closely watched by market players, as managers usually have an early access to data regarding performance of their companies, which could be used as a leading indicator of overall economic activity. Readings above the key level of 50.0 are indicative of expansion in activity. Higher than expected values of the PMI would bolster demand for the loonie. The official reading is due out at 14:00 GMT.

Mexico

Consumer sentiment

At 13:00 GMT Mexicos Instituto Nacional de Estadística y Geografía (INEGI) is to report on consumer sentiment in the country. The corresponding index came in at 90.52 in July, or the lowest level since April. It is based on a sample of 2336 households located in the 32 major cities in Mexico. The index has a base of 100 as of January 2003. Readings above 100 are indicative of optimism, 100.00 indicates neutrality, while readings below 100 signify predominant pessimism. The survey on consumer confidence belongs to the group of economic indicators, which measure financial confidence among consumers. The more confidence in economic conditions consumers have, the more inclined they will be to spend money, which in turn stimulates the economy. Better than projected survey results usually signal that optimism among consumers has strengthened, while this may lead to higher spending in the country. Better results tend to provide support to the local currency.

Bank of Mexico policy decision

Bank of Mexico (Banco de México) probably left its benchmark interest rate (overnight interbank rate) without change at 3.0% at the policy meeting today. The central bank reduced the overnight rate by 0.50% to the current record low level of 3.0% at its June 6th meeting, in order to bolster economy, that has not managed to recover in 2014. At the end of May Bank of Mexico revised down its GDP forecast for 2014 to between 2.3% and 3.3% from 3% to 4%, as estimated earlier.

Short-term interest rates are of utmost importance for the valuation of national currencies. In case Bank of Mexico is dovish about inflationary pressure in the economy and, thus, decides to maintain or even further reduce the benchmark rate, this will have a bearish effect on the peso.

The official policy decision is scheduled to be announced at 14:00 GMT.

Technical view

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 12.0569. In case CAD/MXN manages to breach the first resistance level at 12.1312, it will probably continue up to test 12.1734. In case the second key resistance is broken, the pair will probably attempt to advance to 12.2477.

If CAD/MXN manages to breach the first key support at 12.0147, it will probably continue to slide and test 11.9404. With this second key support broken, the movement to the downside will probably continue to 11.8982.

The mid-Pivot levels for today are as follows: M1 – 11.9193, M2 – 11.9776, M3 – 12.0358, M4 – 12.0941, M5 – 12.1523, M6 – 12.2106.

In weekly terms, the central pivot point is at 12.0238. The three key resistance levels are as follows: R1 – 12.1060, R2 – 12.1813, R3 – 12.2635. The three key support levels are: S1 – 11.9485, S2 – 11.8663, S3 – 11.7910.