Forex Market: USD/CAD daily trading outlook

Friday’s trade saw USD/CAD within the range of 1.3714-1.3847. The pair closed at 1.3766, rising 0.30% on a daily basis. It has been the 20th gain in the past 34 trading days and also a second consecutive one. In addition, the daily high has been the highest level since February 17th, when a high of 1.3900 was registered. In weekly terms, USD/CAD lost 0.58% of its value last week, while marking its fifth consecutive week of decline. The pair has depreciated 1.61% so far during the current month, following three successive months of gains.

At 8:08 GMT today USD/CAD was losing 0.32% for the day to trade at 1.3746. The pair touched a daily low at 1.3738 at 6:55 GMT, overshooting the daily S2 level, and a daily high at 1.3792 during early Asian trade.

Canada’s dollar distanced from recent highs against its US counterpart, as crude oil futures recorded a 3.67% drop on Friday. February 19th marked the 25th drop in oil prices out of the past 46 trading days. Oil futures for April delivery went down as low as $29.05 per barrel on February 19th, or the lowest level since February 17th, and closed at a level of $29.64. As of 8:18 GMT today the commodity was gaining 2.70% on a daily basis to trade at $32.66 per barrel, after going up as high as $32.70 earlier. Oil has trimmed its slump to 2.74% so far during the current month.

On Monday USD/CAD trading may be influenced by the following macroeconomic report listed below.

Fundamentals

United States

Manufacturing PMI by Markit – preliminary reading

Manufacturing activity in the United States probably was little changed in February, with the corresponding preliminary Purchasing Managers’ Index coming in at a reading of 52.5, according to market expectations. If so, this would be the highest reading since November 2015, when the PMI was reported at a final 52.8. In January the final seasonally adjusted PMI stood at 52.4, down from a preliminary 52.7.

According to Markit’s statement: ”Production volumes were reported to have increased at a solid pace in January, with the rate of expansion accelerating from December’s recent low. Reports from survey respondents cited improved spending patterns, in particular from domestic clients. Reflecting this, latest data pointed to a rebound in new business growth to its fastest for three months.”

”Payroll numbers expanded again at the start of the year, but the rate of job creation eased since December and was slightly slower than seen during 2015 as a whole. Some firms indicated that caution about the business outlook had held back staff hiring in January. Meanwhile, manufacturers also reported a slight drop in pre-production inventories and broadly unchanged stocks of finished goods at their plants. Growth of input buying also remained subdued, with the latest rise in purchasing activity the second-slowest recorded over the past two years.”

Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a better-than-anticipated performance, this would have a moderate bullish effect on the US dollar. The preliminary PMI reading by Markit Economics is due out at 14:45 GMT.

Correlation with other Majors

Taking into account the week ended on February 19th and the daily closing levels of the currency pairs involved, we come to the following conclusions in regard to the strength of relationship:

USD/CAD to EUR/USD (0.7199, or strong)
USD/CAD to GBP/USD (0.3667, or moderate)
USD/CAD to USD/JPY (0.2979, or moderate)
USD/CAD to NZD/USD (-0.4997, or moderate)
USD/CAD to USD/CHF (-0.8899, or very strong)
USD/CAD to AUD/USD (-0.9622, or very strong)

1. During the examined period USD/CAD moved strongly in one and the same direction with EUR/USD.

2. USD/CAD moved almost equally in the opposite direction compared to USD/CHF and AUD/USD during the past week.

Daily and Weekly Pivot Levels

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

R1 – 1.3778
R2 – 1.3790
R3 (range resistance) – 1.3803
R4 (range breakout) – 1.3839

S1 – 1.3754
S2 – 1.3742
S3 (range support) – 1.3729
S4 (range breakout) – 1.3693

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

Central Pivot Point – 1.3776
R1 – 1.3902
R2 – 1.4039
R3 – 1.4165

S1 – 1.3639
S2 – 1.3513
S3 – 1.3376