Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range between 1.2119 and 1.2011, the lowest in more than three months. The pair closed at 1.2034, losing 0.43% for the day.

At 6:20 GMT today USD/CAD was down 0.03% for the day to trade at 1.2028. The cross held in a daily range of 1.2022 – 1.2048.

Fundamentals

United States

The preliminary estimate of the US Gross Domestic Product will probably point to an annualized rate of growth of 1.0% in the first quarter, a slowdown from the final 2.2% economic expansion in Q4 2014 and 5.0% during the previous three months which was the highest growth rate since Q3 2003.

The report on GDP is closely watched by traders as they look for higher rates of growth as a sign that interest rates may follow the same direction. The same logic applies to the opposite scenario. Higher interest rates will attract more investors willing to purchase assets in the US, which will increase demand for the US dollar, and vice versa. If an economy is experiencing a robust rate of growth, the benefits will eventually affect the end consumer because of the increased likelihood of spending. Furthermore, through increased consumer expenditures the economy has the potential to expand even more. In case the preliminary GDP estimate outpaced expectations, this would certainly heighten the appeal of the greenback. The preliminary data is due out at 12:30 GMT.

Due later in the day, the index of pending home sales in the United States will probably register a 1.0% increase in the March number of homes under contract to be sold, but still awaiting the closing transaction. If confirmed, this would be a third straight monthly increase.

When a sales contract is accepted for a property, it is recorded as a pending home sale. As an indicator, the index provides information on the number of future home sales, which are in the pipeline. It gathers data from real estate agents and brokers at the point of a sale of contract and is currently the most accurate indicator regarding US housing sector. It samples over 20% of the market. In addition, over 80% of pending house sales are converted to actual home sales within 2 or 3 months. Therefore, this index has a predictive value about actual home sales.

Although there are some cancellations, there are not enough for the data to be skewed one way or another. The base value of the index is equal to 100, while the base year is 2001, which saw a high level of home sales.

The National Association of Realtor’s (NAR) will release the official index value at 14:00 GMT. In case pending home sales increased more than anticipated, this would have a certain bullish effect on the greenback.

Canada

Prices of raw materials in Canada probably declined by 1.8% in March from a month earlier, Statistics Canada is expected to report at 12:30 GMT. The Raw Materials Price Index surged 6.1% in February, ending 7 straight monthly declines. In annual terms, commodity prices were down 21.8% in February.

RMPI measures the prices paid by Canadian manufacturers for key raw materials and includes products that are not produced in Canada. It is a leading gauge of consumer inflation, as higher prices of producer input are typically passed on down the chain towards the end-consumer. A higher-than-expected reading should support the Canadian dollar, and vice versa.

Statistics Canada is also expected to report that prices of domestically produced goods sold by manufacturers fell by 0.1% on a monthly basis in March, following a 1.8% jump in February. The annualized Industrial Product Price Index (IPPI) was at -1.6% last month.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2055. In case it penetrates the first resistance level at 1.2098, it will encounter next resistance at 1.2163. If breached, upside movement may attempt to advance to 1.2206.

If the cross drops below its S1 level at 1.1990, it will next see support at 1.1947. If the second key support zone is breached, downward movement may extend to 1.1882.

In weekly terms, the central pivot point is at 1.2195. The three key resistance levels are as follows: R1 – 1.2292, R2 – 1.2403, R3 – 1.2500. The three key support levels are: S1 – 1.2084, S2 – 1.1987, S3 – 1.1876.