Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.2353 – 1.2199. The pair closed 0.67% lower at 1.2254, falling for a third straight day.

At 7:19 GMT today USD/CAD was up 0.30% for the day to trade at 1.2291. The cross held in a daily range of 1.2254 – 1.2293 and is down 1.2% for the week so far.

Fundamentals

United States

The number of people in the United States who filed for unemployment assistance for the first time during the week ended June 6th probably inched up to 277 000 from 276 000 in the previous seven days. The 4-week moving average, an indicator used to iron out week-to-week volatility, was at 274 750 last week, above the previous weeks upward-revised average.

Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the count of claims dropped more than projected, this would have a bullish effect on the greenback.

The number of continuing jobless claims probably rose to 2 188 000 during the week ended May 30th from 2 196 000 the previous period, a multi-year low. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago. The Department of Labor is to release the weekly report at 12:30 GMT.

Separate data may show that retail sales in the US probably jumped 1.1% in May on a monthly basis, according to the median forecast by experts, following a flat reading in April and a 1.1% increase in March.

The report on retail sales reflects the dollar value of merchandise sold within the retail trade by taking a sampling of companies operating in the sector of selling physical end-products to consumers. The retail sales report encompasses both fixed point-of-sale businesses and non-store retailers, such as mail catalogs and vending machines. The Census Bureau, which is a part of the Department of Commerce, surveys about 5 000 companies of all sizes, from huge retailers such as Wal-Mart to independent small family firms.

US core retail sales, or retail sales ex autos, probably rose 0.7% in May from a month earlier, following a 0.1% gain in April. This indicator removes large ticket prices and historical seasonality of automobile sales.

The retail sales index is considered as a coincident indicator, thus, it reflects the current state of the economy. It is also deemed a pre-inflationary indicator, which investors can use in order to reassess the probability of an interest rate hike or cut by the Federal Reserve Bank. In addition, this indicator provides key information regarding consumer spending trends. Consumer expenditures, on the other hand, account for almost two-thirds of the US Gross Domestic Product. Therefore, a larger-than-expected rate of increase in sales would certainly boost the US dollar. The official report is due out at 12:30 GMT.

Canada

Selling prices of new homes in Canada probably rose in April by 0.1% from a month earlier, according to analysts expectations. This follows a flat reading in March and a 0.2% price growth in February. Home values climbed at the annualized rate of 1.2% in March following up on a 1.4% increase in February. The New Housing Price Index is a key indicator, reflecting the health of Canadian housing market. In case prices surged more than anticipated, this would be an indication of strong demand and would, therefore, have a bullish effect on the loonie. Statistics Canada will release the official data at 12:30 GMT.

The statistics agency will also report on capacity utilization for the first quarter of the year. The Capacity Utilization Rate probably fell to 83.0% from 83.6% in the fourth quarter, which was the highest in more than 8 years.

This indicator represents the percentage of production capacity being utilized in the industrial sector and reflects overall growth and demand in the country. Its reading is used for comparison with the optimal rate for a stable production process, or the highest possible level of production in an enterprise, in case it operates within a realistic work schedule and has sufficient raw materials and inventories at its disposal. Very high rates of capacity utilization usually lead to inflationary pressures, and can thus be used as a leading indicator of consumer inflation. In general, higher-than-anticipated rates tend to support the local currency.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2269. In case it penetrates the first resistance level at 1.2338, it will encounter next resistance at 1.2423. If breached, upside movement may attempt to advance to 1.2492.

If the cross drops below its S1 level at 1.2184, it will next see support at 1.2115. If the second key support zone is breached, downward movement may extend to 1.2030.

In weekly terms, the central pivot point is at 1.2456. The three key resistance levels are as follows: R1 – 1.2548, R2 – 1.2658, R3 – 1.2750. The three key support levels are: S1 – 1.2346, S2 – 1.2254, S3 – 1.2144.