Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.3045 – 1.2938. The pair closed 0.42% higher at 1.3000, rising for a second day.

At 08:35 GMT today USD/CAD was up 0.22% for the day to trade at 1.3029. The cross held in a daily range of 1.2992 – 1.3045 and is down 0.2% for the week so far after rising for five consecutive weeks.

Fundamental outlook

United States

The Employment Cost Index (ECI) in the United States probably rose a solid 0.6% on quarterly basis during the second three months of the year, following another 0.7% gain in the first quarter. This index measures the change in the price of labor, defined as compensation per employee hour worked. It shows changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. The ECI reflects cost pressures within companies that could trigger price inflation for finished goods and services. A larger-than-expected rate of increase would generally provide support to the US dollar. The Bureau of Labour Statistics is to release the quarterly data at 12:30 GMT.

A report later in the day may show that manufacturing activity in the region of Chicago grew in July after contracting the previous two months. The Chicago Purchasing Managers Index (PMI) is expected to have risen to 50.5 this month, according to expectations, from 49.4 in June and 46.2 in May. The index reflects business conditions in the regions manufacturing sector and is interrelated with the Manufacturing Index published by the Institute for Supply Management (ISM). A reading above the key level of 50.0 is indicative of expansion in manufacturing activity. In case the PMI improved more than forecast, this would support demand for the US dollar. The data are due out at 13:45 GMT.

Also today, a monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States declined in July, but less than previously estimated. The final reading of the corresponding index, which usually comes out two weeks after the preliminary data, will likely register at 94.0, up from a preliminary value of 93.3 reported on July 17th. In June, the gauge of confidence registered a final reading of 96.1.

The survey encompasses about 500 respondents throughout the country. The index is comprised of two major components, a gauge of current conditions and a gauge of expectations. The current conditions index is based on the answers to two standard questions, while the index of expectations is based on three standard questions. All five questions have an equal weight in determining the value of the overall index.

The sub-index of current economic conditions, which measures US consumers’ views of their personal finances, probably fell to a reading of 106.3 from a final 108.9 in June. The sub-index of consumer expectations may have dropped to 86.0 in July from a final value of 87.8 a month earlier.

In case the gauge of consumer sentiment showed a better reading than anticipated, this would have a bullish effect on the US dollar. The report is due at at 14:00 GMT.

Canada

Canadian Gross Domestic Product (GDP) probably grew by 0.1% in May from a month earlier, according to the median forecast by experts, following a 0.1% contraction in April and another 0.2% decline in March. Year-on-year, the Canadian economy probably expanded 0.8% in May, following a 1.2% expansion in the previous month.

The GDP represents the total monetary value of all goods and services produced by one nation over a specific period of time. What is more, it is the broadest indicator of a country’s economic activity. The report on GDP is closely watched by traders as they will usually look for higher rates of growth as a sign that interest rates will follow the same direction. Higher interest rates will attract more investors, willing to purchase assets in the country, while, at the same time, this will bolster demand for the national currency. 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, while through increased consumer expenditures the economy has the potential to expand even further. Therefore, in case Canada’s growth outpaced expectations, this would heighten the appeal of the Canadian dollar. Statistics Canada will release the official figure at 13:30 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.2994. In case it penetrates the first resistance level at 1.3051, it will encounter next resistance at 1.3101. If breached, upside movement may attempt to advance to 1.3158.

If the cross drops below its S1 level at 1.2944, it will next see support at 1.2887. If the second key support zone is breached, downward movement may extend to 1.2837.

In weekly terms, the central pivot point is at 1.3022. The three key resistance levels are as follows: R1 – 1.3130, R2 – 1.3211, R3 – 1.3319. The three key support levels are: S1 – 1.2941, S2 – 1.2833, S3 – 1.2752.