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Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.2786-1.2875. The pair closed at 1.2854, shedding 0.12% on a daily basis. It has been the 44th drop in the past 88 trading days. The daily high has been a lower-high test of the high from May 4th. The major pair has extended its advance to 2.58% so far during the current month, following three consecutive months of decline.

At 6:28 GMT today USD/CAD was edging up 0.16% on the day to trade at 1.2874. The pair touched a daily high at 1.2887 at 6:10 GMT, marking an exact test of the high from May 4th, and a daily low at 1.2852 during the early phase of the Asian trading session.

Meanwhile, crude oil futures reached 3-day highs on Thursday on supply disruption concerns in Northern Canada due to a spreading wildfire that led to the evacuation of almost 88 000 people. May 5th marked the 54th gain in oil prices out of the past 99 trading days. Oil futures for June delivery went up as high as $46.07 per barrel on May 5th, or the highest price level since May 2nd, and closed at $44.39, gaining 1.39% compared to Wednesday’s close. As of 6:35 GMT today the commodity was losing 0.95% to trade at $43.97, after going down as low as $43.74 per barrel earlier.

On Friday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.

Fundamentals

United States

Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings

Employers in all sectors of economy in the United States, excluding the farming industry, probably added 200 000 new jobs in April, according to the median forecast by experts, after a job gain of 215 000 in March.

Employment in retail trade rose by 48 000 in March, in construction – by 37 000, in health care – by 37 000, in food services and drinking places – by 25 000 and in financial activities – by 15 000. Job growth was little changed in professional and business services for a third straight month in March. At the same time, employment in US manufacturing sector dropped by 29 000 during the month, while the mining industry lost 12 000 job positions, according to the report by the Bureau of Labor Statistics (BLS). Employment in other key industries such as wholesale trade, transportation and warehousing, information, and government remained little changed during the same period.

Total non-farm payrolls account for 80% of the workers, who produce the entire Gross Domestic Product of the United States. Therefore, in case of a lower-than-expected gain in jobs in April, the US dollar would see heavy selling pressure.

Average Hourly Earnings probably increased 0.3% in April compared to the prior month, according to market expectations, following another 0.3% gain to $25.43 in March.

Meanwhile, the rate of unemployment in the country probably remained at 5.0% for a second consecutive month in April, according to market expectations. In February it stood at 4.9%.

The total number of people unemployed was almost unchanged at 8 million in March. The unemployment rate for adult men (4.5%), adult women (4.6%), teenagers (15.9%), Whites (4.3%), Blacks (9.0%), Asians (4.0%) and Hispanics (5.6%) showed little or no change during the month.

The number of long-term unemployed (those looking for employment for 27 weeks or more) was almost unchanged at 2.2 million during March and comprised 27.6% of the unemployed, according to the BLS. At the same time, the number of persons in part-time employment for economic reasons (involuntary part-time workers) was essentially unchanged at 6.1 million in March. In case the overall rate of unemployment met expectations or rose further, this would have a strong bearish effect on the US dollar. The Bureau of Labor Statistics will release the official employment data at 12:30 GMT.

Canada

Change in Employment, Unemployment Rate

The number of the employed people in Canada probably increased by 3 500 in April, according to market expectations, following a surge by 40 600 in March. It has been the sharpest monthly employment growth since October 2015, when employed persons in the country were 44 400 more.

In March, the number of part-time employed increased by 5 300, while the number of persons in full-time employment went up by 35 300. During the month employment was higher in sectors such as health care and social assistance (+25 000), accommodation and food services (+18 000), professional, scientific and technical services (+12 000) and ”other services” (+9 900). Fewer persons were employed in Canadian manufacturing sector during the month (-32 000).

Meanwhile, the rate of unemployment in the country probably rose to 7.2% in April, according to the median forecast by analysts, from 7.1% in March. The latter has been a level unseen since December 2015. In March the number of people unemployed fell by 25 500 to reach 1 384 900, while the labour force increased by 15 100 to 19 428 400.

A lower-than-expected rate of increase in employment and a surge in unemployment rate would have a strong bearish effect on the local currency. Statistics Canada is expected to release the official employment report at 12:30 GMT.

Ivey Purchasing Managers Index

Activity among purchasing managers in Canada probably increased at a faster pace in April, with the corresponding seasonally adjusted Purchasing Managers Index coming in at a value of 52.5. In March the gauge was reported at a level of 50.1, or the lowest since December 2015. If expectations were met, April would be the fourth consecutive month of activity expansion. In March the sub-gauge of supplier deliveries slipped to 48.5 from a reading of 49.4 in February, while the gauge of inventories went down to 48.6 from 49.9. On the other hand, the sub-gauge of employment advanced to 50.7 in March from 50.3 in the prior month, while that of prices paid rose to 58.5 from 57.8.

This indicator is based on a survey sponsored by Richard Ivey School of Business and the Canadian Purchasing Management Association. It encompasses 175 respondents in both the public and the private sector, selected in accordance with their geographic location and activity, so that the entire economy is covered. Activity among purchasing managers is closely watched by market players, as managers usually have an early access to data regarding performance of their companies, which could be used as a leading indicator of overall economic activity. Readings above the key level of 50.0 are indicative of improvement in business conditions, while those below it suggest predominant pessimism (lower activity). In case the PMI came above market expectations, this would have a moderate-to-strong bullish effect on the Canadian dollar. The official index reading is due out at 14:00 GMT.

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 – 1.2838
R1 – 1.2891
R2 – 1.2927
R3 – 1.2980

S1 – 1.2802
S2 – 1.2749
S3 – 1.2713

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

Central Pivot Point – 1.2589
R1 – 1.2682
R2 – 1.2812
R3 – 1.2905

S1 – 1.2459
S2 – 1.2366
S3 – 1.2236

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