Forex Market: USD/CAD daily trading outlook

Yesterdays trade saw USD/CAD within the range of 1.2349 – 1.2280 to close 0.26% lower at 1.2294.

At 7:05 GMT today USD/CAD was up 0.18% for the day to trade at 1.2316. The cross held in a daily range of 1.2285 – 1.2316 and is down less than 0.1% for the week so far.

Fundamentals

United States

The Mortgage Bankers Association will release its mortgage applications data for the week ended June 12th at 11:00 GMT, projected to register an increase of 1.4%. The MBA Mortgage Applications index measures the change in the number of new applications for mortgages backed by the Association during the reported week. It includes both refinancing and home purchases. A better-than-expected reading should be considered as positive for the US dollar, and vice versa.

The index jumped a seasonally-adjusted 8.4% in the week ended June 5th compared to a week earlier, and 19% on an unadjusted basis. The index of refinancing applications rose 7% from the previous week, while the gauge of loan requests for home purchases soared 10%.

FOMC meeting

The Federal Open Market Committee concludes its two-day policy meeting today and will likely leave the Federal Reserves benchmark interest rate unchanged within the record-low range of 0% – 0.25%. A lift-off is expected by the end of the current year as the US economy “seems well positioned for continued growth”, Fed Chair Janet Yellen said at a speech on May 22nd at the Providence Chamber of Commerce, Providence, Rhode Island, although a gradual pace is warranted.

“After we begin raising the federal funds rate, I anticipate that the pace of normalization is likely to be gradual,” Ms. Yellen said. “The various headwinds that are still restraining the economy, as I said, will likely take some time to fully abate, and the pace of that improvement is highly uncertain. If conditions develop as my colleagues and I expect, then the FOMCs objectives of maximum employment and price stability would best be achieved by proceeding cautiously, which I expect would mean that it will be several years before the federal funds rate would be back to its normal, longer-run level.”

“Having said that, I should stress that the actual course of policy will be determined by incoming data and what that reveals about the economy. We have no intention of embarking on a preset course of increases in the federal funds rate after the initial increase. Rather, we will adjust monetary policy in response to developments in economic activity and inflation as they occur. If conditions improve more rapidly than expected, it may be appropriate to raise interest rates more quickly; conversely, the pace of normalization may be slower if conditions turn out to be less favorable.”

Excerpt from the Feds April 28-29th meeting minutes: “The Committee agreed to maintain the target range for the federal funds rate at 0 to ¼ percent and to reaffirm in the statement that the Committee’s decision about how long to maintain the current target range for the federal funds rate would depend on its assessment of actual and expected progress toward its objectives of maximum employment and 2 percent inflation. Members continued to judge that this assessment of progress would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. Members agreed to retain the indication that the Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

Canada

At 12:30 GMT Statistics Canada is expected to report that Canadian wholesale sales rose 0.3% in April, following a 0.8% gain in March which reversed a 0.4% drop in February. This is a leading indicator of consumer spending which measures the total value of sales at the wholesale level. Lower wholesales are indicative of less active retail trade and, respectively, consumption. Therefore, a drop in wholesale sales or a smaller-than-expected increase would have a bearish effect on the US dollar, and vice versa.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2308. In case it penetrates the first resistance level at 1.2335, it will encounter next resistance at 1.2377. If breached, upside movement may attempt to advance to 1.2404.

If the cross drops below its S1 level at 1.2266, it will next see support at 1.2239. If the second key support zone is breached, downward movement may extend to 1.2197.

In weekly terms, the central pivot point is at 1.2331. The three key resistance levels are as follows: R1 – 1.2464, R2 – 1.2605, R3 – 1.2738. The three key support levels are: S1 – 1.2190, S2 – 1.2057, S3 – 1.1916.