Forex Market: USD/CAD daily trading outlook

Friday’s trade saw USD/CAD within the range of 1.2576-1.2426. The pair closed 0.57% lower at 1.2484, dropping for a third straight session. The pair fell 1% for the week.

At 6:52 GMT today USD/CAD was down 0.19% for the day at 1.2464. The pair held in a daily range of 1.2453 – 1.2496.

Fundamentals

United States

Activity in the US sector of services probably grew faster in March from a month earlier, with the final March reading expected to confirm a preliminary reading of 58.6 released March 26th, compared to 57.1 in February. If confirmed, this would be the fastest pace of growth since September. The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT, and hotels and restaurants. Values above the key level of 50.0 indicate optimism (expanding activity). Higher-than-expected PMI readings would support the US dollar. Markit Economics will release the report at 13:45 GMT.

The Institute for Supply Management will publish its separate and more widely tracked data on US services sector growth at 14:00 GMT. The ISM is expected to report a March reading of 56.5, compared to 56.9 in February. The metric has remained above the expansion-contraction threshold of 50 since December 2009. This is a compound index based on the values of four equally-weighted components that comprise it. These sub-indexes reflect seasonally adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and supplier deliveries.

The business report is based on data compiled from monthly replies to questions asked of over 370 purchasing and supply executives operating in over 62 different industries, which represent nine divisions from the Standard Industrial Classification (SIC) categories.

Participants can either respond with “better”, “same”, or “worse” to the questions about the industry, in which they operate. The resulting PMI value is measured from 0 to 100. If the index shows a value of 100.0, this means that 100% of the respondents reported an improvement in conditions, and vice versa. If 100% of the respondents saw no change in conditions, the index will show a reading of 50.0. Therefore, values above the key level of 50.0 are indicative of optimism (expanding activity). A better-than-expected reading would boost the US dollar, and vice versa.

Canada

Activity among purchasing managers in Canada probably improved in March, with the corresponding seasonally adjusted PMI expected to rebound back above the key contraction-expansion level of 50 to a value of 51.1. In January the gauge slipped below the key 50.0 level for the first time since June 2014, to reach 45.4 and was at 49.7 in February.

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 public and the private sectors, selected in accordance to their geographic location and activity, so that the entire economy is covered. Activity among purchasing managers is closely observed by market players since 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 at the key level of 50.0 are indicative of no change in business conditions. In case the PMI demonstrated a larger-than-expected improvement, this would boost demand for the loonie. The official result is due out at 14:00 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2495. In case it penetrates the first resistance level at 1.2565, it will encounter next resistance at 1.2645. If breached, upside movement may attempt to advance to 1.2715.

If the cross drops below its S1 level at 1.2415, it will next see support at 1.2345. If the second key support zone is breached, downward movement may extend to 1.2265.

In weekly terms, the central pivot point is at 1.2565. The three key resistance levels are as follows: R1 – 1.2704, R2 – 1.2924, R3 – 1.3063. The three key support levels are: S1 – 1.2345, S2 – 1.2206, S3 – 1.1986.