Forex Market: USD/CAD daily trading forecast

Friday’s trade saw USD/CAD within the range of 1.3052-1.3193. The pair closed at 1.3078, shedding 0.71% on a daily basis, while marking a third straight trading day of losses. The daily low has been the lowest level since October 23rd, when a low of 1.3037 was reached. In weekly terms, USD/CAD lost 0.65% last week, following a 1.96% surge in the week ended on October 25th.

At 6:49 GMT today USD/CAD was losing 0.04% for the day to trade at 1.3075. The pair touched a daily low at 1.3064 during early Asian trade. October 23rd low may be a possible level of support.

On Monday USD/CAD trading may be influenced by an array of macroeconomic reports as listed below.

Fundamentals

United States

Manufacturing PMI by Markit – final estimate

The final estimate of the Manufacturing Purchasing Managers Index for October probably confirmed the flash estimate of 54.0, which was reported on October 23rd. If expectations were met, this would be the highest PMI reading since May 2015, when the final gauge was reported at 54.0. In September the final seasonally adjusted PMI stood at 53.1, inching up from a preliminary value of 53.0.

According to preliminary data by Markit, ”October data indicated a robust and accelerated expansion of production levels across the manufacturing sector. The latest rise in output was the fastest since March, which brought the pace of expansion back in line with the post-crisis average. Survey respondents mainly cited improving demand from domestic markets and competitive pricing strategies.”

”Improved sales patterns and rising production requirements contributed to a rebound in job creation from the 27-month low recorded during September. Manufacturers signaled the sharpest increase in payroll numbers since July, but the pace of staff hiring was still weaker than the post-crisis average.”

”Manufacturers remained cautious in terms of their inventory holdings and input buying during October. Reflecting this, stocks of finished goods decreased for the third successive month. The latest survey marked two years of rising purchasing activity at manufacturing companies, but their pre-production inventories increased only modestly”, Markit stated.

Values above the key level of 50.0 indicate optimism (expanding activity). In case the final PMI for October confirmed or even exceeded the preliminary reading, this would cause a moderate bullish impact on the US dollar. The final reading is due out at 14:45 GMT.

ISM Manufacturing PMI

Activity in United States’ manufacturing sector probably slowed down for a fourth consecutive month in October, with the corresponding manufacturing PMI coming in at a reading of 50.0, according to expectations, down from 50.2 in September. If so, this would be the lowest PMI reading since May 2013, when the gauge was reported in the area of contraction (49.0).

The New Orders Index fell to 50.1 in September from 51.7 in August. The gauge of Production slipped to 51.8 from 53.6 in the previous month. The Employment Index went down to 50.5 in September from 51.2 in August, while the Prices Index lowered to a level of 38.0 from 39.0 during the period, signaling lower prices of raw materials for the 11th straight month. The New Export Orders Index remained steady at a reading of 46.5 in September. During the month, 7 manufacturing industries reported growth, while 11 reported contraction in activity, according to data by the Institute for Supply Management (ISM).

In case the PMI slowed down more than anticipated, this would have a strong bearish effect on the greenback. The Institute for Supply Management (ISM) is to release the official reading at 15:00 GMT.

Canada

RBC Manufacturing PMI

At 14:30 GMT Royal Bank of Canada (RBC) is to report on manufacturing activity in October. The corresponding Manufacturing Purchasing Managers Index remained in the area of contraction for a second straight month in September, coming in at 48.6. It has been the lowest PMI level on record.

The PMI report is based on data collected from monthly replies to questionnaires sent to supply managers in over 400 industrial companies. The PMI is a compound index based on five individual indexes: new orders, production, employment, delivery time, stocks of purchases. Values of the index below the key level of 50.0 indicate overall decrease in activity in the sector, while readings above 50.0 are indicative of expansion in activity. PMIs are earlier indicators of economic conditions published on a monthly basis and are available much before the publication of relevant data from government authorities. This way they provide earlier insight about economic development trends.

In case the gauge went deeper into the zone of contraction in October, this would have a moderate bearish effect on the Canadian dollar.

Correlation with other Majors

Taking into account the week ended on November 1st and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

USD/CAD to AUD/USD (0.1305, or weak)
USD/CAD to EUR/USD (0.0979, or very weak)
USD/CAD to USD/CHF (-0.0021, or very weak)
USD/CAD to USD/JPY (-0.1778, or weak)
USD/CAD to NZD/USD (-0.2410, or weak)
USD/CAD to GBP/USD (-0.8161, or very strong)

1. During the examined period USD/CAD moved almost equally in the opposite direction compared to GBP/USD.

2. USD/CAD moved almost independently compared to EUR/USD and USD/CHF during the past week. The correlation between USD/CAD and USD/CHF was practically non-existent.

Daily and Weekly Pivot Levels

By employing the traditional calculation method, the daily pivot levels for USD/CAD are presented as follows:

Central Pivot Point – 1.3108
R1 – 1.3163
R2 – 1.3249
R3 – 1.3304

S1 – 1.3022
S2 – 1.2967
S3 – 1.2881

By using the traditional method of calculation again, the weekly pivot levels for USD/CAD are presented as follows:

Central Pivot Point – 1.3137
R1 – 1.3222
R2 – 1.3366
R3 – 1.3451

S1 – 1.2993
S2 – 1.2908
S3 – 1.2764