Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.2535 – 1.2363. The pair closed 0.97% lower at 1.2401, snapping two sessions of gains.

At 7:13 GMT today USD/CAD was up 0.04% for the day to trade at 1.2408. The cross held in a daily range of 1.2386 – 1.2421 and is down 0.3% for the week so far after settling the previous two weeks higher.

Fundamental outlook

United States

Employers in the US non-farm private sector probably added 200 000 new jobs in May, according to the median estimate by experts, following 169 000 new positions added during April, which was the lowest since January 2014.

The employment report by Automated Data Processing Inc (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of the governments employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs has a direct link to consumer spending, while the latter is a major driving force behind economic growth. In case new jobs growth came in above expectations, this would bolster demand for the US dollar. The official figure is scheduled to be published at 12:15 GMT.

Services activity

Activity in the US sector of services probably grew slower in May from a month earlier, with the final reading expected to come in at 56.5, an inch above the preliminary reading of 56.4 released on May 26th. The gauge stood at 57.4 in April.

The preliminary report showed a robust rise in services sector output, although the rate of growth was the lowest in four months, with service providers indicating the sharpest upturn in payroll numbers since June 2014. Meanwhile, input cost inflation rose to a nine-month high.

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 release its separate and more widely tracked data on US services sector growth at 14:00 GMT. The ISM is expected to report a May reading of 57.0, compared to 57.8 a month earlier, which was the highest in five months. 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. If the index shows a value of 0, this means that 100% of the respondents reported a deterioration in conditions. If 100% of the respondents saw no change in conditions, the index will show a reading of 50.0. Therefore, readings 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

The deficit on Canadas balance of trade probably shrank to CAD 2.10 billion in April, according to the median estimate by experts, after it widened to a record CAD 3.02 billion in March. This also marked the countrys biggest quarterly deficit as Februarys reading was revised down to a deficit of CAD 2.22 billion from the initial CAD 0.98 billion.

Exports rose by only 0.4% in March as an increase in shipments of motor vehicles and parts was largely offset by a decline in energy products. Excluding the latter, exports rose 2.4% for the month. Imports rose 2.2% in March as 7 out of 11 sections increased, with imports of consumer goods surging 7.9% and motor vehicles and parts by 3.7%.

The trade balance, as an indicator, measures the difference in value between a nation’s exported and imported goods and services during the reported period. It reflects the net export of goods and services, or one of the components to form the country’s Gross Domestic Product. Generally, exports reflect economic growth, while imports indicate domestic demand. In case the trade deficit shrank more than expected, this would have a bullish effect on the Canadian dollar, and vice versa. Statistics Canada will release the official trade data at 12:30 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2433. In case it penetrates the first resistance level at 1.2503, it will encounter next resistance at 1.2605. If breached, upside movement may attempt to advance to 1.2675.

If the cross drops below its S1 level at 1.2331, it will next see support at 1.2261. If the second key support zone is breached, downward movement may extend to 1.2159.

In weekly terms, the central pivot point is at 1.2420. The three key resistance levels are as follows: R1 – 1.2567, R2 – 1.2686, R3 – 1.2833. The three key support levels are: S1 – 1.2301, S2 – 1.2154, S3 – 1.2035.