Yesterday’s trade saw USD/CAD within the range of 1.2628-1.2750. The pair closed at 1.2725, rising 0.55% on a daily basis. It has been the 40th gain in the past 78 trading days and also the steepest one since April 4th. The daily low has been an exact test of the low from April 19th. USD/CAD has depreciated 2.21% so far during the current month, following two consecutive months of decline.
At 7:06 GMT today USD/CAD was inching up 0.05% on the day to trade at 1.2731. The pair touched a daily high at 1.2740 at 7:03 GMT, overshooting the daily R1 level, and a daily low at 1.2687 during mid-Asian trade.
The loonie remained in proximity to recent highs, as crude oil futures continued their advance, reaching highs unseen since early November 2015 on Thursday. April 21st marked the 48th gain in oil prices out of the past 89 trading days. Oil futures for June delivery went up as high as $44.48 per barrel on April 21st, or the highest price level since November 10th 2015, and closed at $43.45, soaring 1.92% from Wednesdays close. As of 7:17 GMT today the commodity was gaining 0.64% to trade at $43.73, after going up as high as $43.88 per barrel earlier.
On Friday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Manufacturing PMI by Markit – preliminary reading
Manufacturing activity in the United States probably increased at a faster rate in April, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 52.0, according to market expectations. In March the final seasonally adjusted PMI stood at 51.5, improving from a preliminary 51.4.
According to Markits statement: ”A faster increase in incoming new work and sustained growth of employment numbers were the main positive developments recorded by the survey during March. Latest data also pointed to stabilization in new export orders, following a slight fall in February. Manufacturers noted that generally improving global economic conditions had helped to offset some of the negative influence on export sales from the strong dollar.”
”Manufacturing companies indicated cautious inventory policies in March. Post-production stocks were broadly unchanged, as has been the case throughout 2016 to date. Stocks of inputs were reduced for the fourth month running and the rate of decline was the fastest since January 2014. Survey respondents linked this fall to relatively subdued output growth and heightened uncertainty about the business outlook. At the same time, growth of input buying was only marginal, following a reduction in February.”
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 13:45 GMT.
Canada
Retail sales
Retail sales in Canada probably dropped 0.8% in February on a monthly basis, according to the median forecast by experts, following a 2.1% surge in the prior month. The latter has been the sharpest monthly increase since March 2010, when sales rose at a revised down rate of 2.1%. In January, sales were higher at motor vehicle and parts dealers (up 4.8% month-over-month), general merchandise stores (up 4.9%), building material and garden equipment (up 3%) and clothing and accessories stores (up 1.2%). On the other hand, sales at gasoline stations decreased 1.6% in January from a month ago.
Retail sales, excluding sales of automobiles, probably fell 0.5% in February compared to January, following a 1.2% surge in the prior month. The latter has been the steepest monthly increase since February 2015, when core sales increased at a revised down rate of 1.8%. Large-ticket purchases are excluded due to their high volatility, which could influence the general trend. In case general retail sales shrank at a faster rate than anticipated in February, this would have a moderate bearish effect on the Canadian dollar. Statistics Canada is to release the official report at 12:30 GMT.
Consumer prices
The annualized consumer inflation in Canada probably slowed down to 1.2% in March, according to market expectations, from 1.4% in February. If expectations were met, this would be the lowest annual inflation since October 2015, when consumer prices rose 1.0% year-on-year.
In February prices of food rose 3.9% year-on-year, following a 4.0% increase in the previous month. Consumers also paid more for shelter during the month (a 1.2% year-on-year increase, following a 1.1% rise in January). On the other hand, cost of clothing and footwear dropped 1.3% in February, following a 0.3% dip in January, according to the report by the Statistics Canada. Additional downward pressure to the general CPI came from cost of transportation (down 0.5% in February, following a 2.2% surge in January).
Bank of Canadas (BoC) annualized Core CPI, which excludes prices of fruits, vegetables, gasoline, fuel oil, natural gas, mortgages, intercity transportation, and tobacco products, probably decelerated to 1.7% in March, according to market expectations, from 1.9% in February. If so, this would be the lowest annual core inflation since July 2014, when the Core CPI rose 1.7%. This is the key measure of inflation, on which the central bank bases its decisions regarding monetary policy. In case both the general CPI and the core CPI met expectations or even fell short of them in March, this would have a strong bearish impact on the Canadian dollar. The official CPI report by the Statistics Canada is due out at 12:30 GMT.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.2736
R2 – 1.2747
R3 (range resistance) – 1.2759
R4 (range breakout) – 1.2792
S1 – 1.2714
S2 – 1.2703
S3 (range support) – 1.2691
S4 (range breakout) – 1.2658
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.2861
R1 – 1.2978
R2 – 1.3134
R3 – 1.3251
S1 – 1.2705
S2 – 1.2588
S3 – 1.2432
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