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Forex Market: USD/CAD trading outlook for Wednesday (November 30th 2016)


Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3400-1.3482. The pair closed at 1.3437, edging up 0.11% compared to Mondays close. It has been the 208th gain in the past 392 trading days. The major pair has increased its advance to 0.21% so far during the current month, following a 2.14% surge in October.

At 8:10 GMT today USD/CAD was inching up 0.06% on the day to trade at 1.3445. The pair touched a daily high at 1.3454 during mid-Asian trade, overshooting the daily R2 level, and a daily low at 1.3415 during the early phase of the Asian trading session.

On Wednesday USD/CAD trading may be influenced by the following macroeconomic reports and other events as listed below.


United States

Fed speakers

At 13:00 GMT the Fed President for Dallas, Robert Kaplan, is to speak on economic conditions, trends and the limits of monetary policy at the Economic Club of New York.

At 16:45 GMT Federal Reserve Board Governor, Jerome Powell, is to attend a discussion on Understanding Fedspeak at the Brookings Institution in Washington, D.C.

At 17:35 GMT the Fed President for Cleveland, Loretta Mester, is scheduled to speak on monetary policy and economic outlook in front of the African American Chamber of Commerce of Western Pennsylvania in Pittsburgh.

Economic outlook or monetary policy-related remarks would heighten USD volatility.

Change in employment by the ADP

Employers in the US non-farm private sector probably added 165 000 new jobs during November, according to the median estimate by experts, following 147 000 new positions added in October. The latter has been the lowest job growth since May.

In October, employment in the goods-producing sector dropped by 18 000, while employment in services increased by 165 000. Employment in trade, transportation and utilities grew by 17 000 during the month, in professional and business services – by 69 000 and in financial activities – by 18 000. On the other hand, employment in US construction decreased by 15 000, while jobs in US manufacturing sector were 1 000 fewer.

In case new job growth was faster than expected in November, this would have a moderate-to-strong bullish effect on the US dollar. The official figure is scheduled to be released at 13:15 GMT.

Personal Income, Personal Spending and PCE Inflation

Personal spending in the United States probably grew 0.5% in October, according to market expectations, while personal income was probably up for a 19th consecutive month in October, increasing at a monthly rate of 0.4%.

Consumer spending, which accounts for over two thirds of the nation’s GDP, rose 0.5% in September from a month ago, following a revised down performance in August. September’s performance came mainly as a result of higher spending on durable and non-durable goods. An additional impulse came from higher spending on services as well.

At the same time, personal income surged 0.3% in September, accelerating from a 0.2% increase in the prior month. In September, compensation of employees rose 0.3%, due to a 0.3% increase in wages and salaries. Additionally, personal income receipts on assets went up 0.2% and personal current transfer receipts edged up 0.1% during the same month.

Higher-than-expected rates of increase imply good employment conditions and, therefore, are dollar positive. The Bureau of Economic Analysis is to publish the official figures at 13:30 GMT.

At the same time, the Core PCE Price Index, the preferred measure of inflation by the Federal Reserve, probably rose 1.7% year-on-year in October, according to expectations. Annualized PCE inflation was at 1.7% in August and in September, also the highest since February. On a monthly basis, the Core PCE Price Index probably increased for a tenth consecutive month in October, going up 0.1%, according to analyst projections.

Chicago manufacturing activity barometer

The Chicago Purchasing Managers’ Index (PMI) probably accelerated to a reading of 52.0 in November, according to market expectations, from 50.6 during the prior month. If so, November would be the sixth consecutive month of activity expansion in the region. In October, the headline index rose at the slowest rate since May, as the gauge of production slowed, while the sub-index of new orders dropped to a level unseen since May. At the same time, the gauges of order backlogs and employment pointed to a slight expansion.

The index reflects business conditions in Chicago’s 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 optimism (expansion in manufacturing activity). In case the PMI accelerated more than forecast, this would have a moderate bullish effect on the US dollar. The ISM-Chicago Inc. will release the official reading of this barometer at 14:45 GMT.

Pending Home Sales

The index of pending home sales in the United States probably rose 0.4% in October from a month ago, according to the median estimate by experts. In September, pending home sales went up 1.5%, exceeding market expectations, which has been the sharpest monthly increase since April. In September, sales in the West surged 4.7%, while those in the South went up 1.9%. On the other hand, sales in the Midwest region edged down 0.2% and those in the Northeast area shrank 1.6% during the same period.

In annual terms, contracts to buy previously owned homes in the United States were 2.4% more in September, rebounding after a 0.2% drop in August. September’s year-on-year increase has been the sharpest one since April.

In case pending home sales rose at a faster pace than anticipated in October, this would have a moderate bullish effect on the US dollar. The National Association of Realtor’s (NAR) will report on the official index performance at 15:00 GMT.

Fed’s Beige Book

At 19:00 GMT the Federal Reserve is to release its ”Beige Book” report. It is published eight times during the year. Each of the banks in the 12 Federal Reserve Districts gathers data in regard to current economic situation in the country on the basis of interviews with key business contacts, economists, market experts, and other sources. In case the Beige Book presents an optimistic economic outlook, this will usually support the US Dollar, while a pessimistic view will have a bearish effect on the currency.


Gross Domestic Product

Canadian Gross Domestic Product (GDP) probably expanded at a rate of 3.4% in Q3 compared to the same quarter a year earlier, according to the median forecast by experts, following a 1.6% contraction in the second quarter. If expectations were met, this would be the fastest annual rate of growth since Q2 2014, when a revised up 3.6% increase was reported (3.1% previously).

In case annualized GDP growth met or even exceeded expectations in Q3, this would have a strong bullish effect on the loonie. The official GDP report is due out at 13:30 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went up as high as 0.684% on November 29th, after which it closed at 0.674% to add 1.1 basis points (0.011 percentage point) compared to November 28th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 1.127% on November 29th, after which it fell to 1.099% at the close to lose 0.004 percentage point compared to November 28th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.425% on November 29th from 0.440% on November 28th. The November 29th yield spread has been the lowest one since November 21st, when the difference was 0.398%.

Daily, Weekly and Monthly Pivot Levels

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

R1 – 1.3445
R2 – 1.3452
R3 (Range Resistance – Sell) – 1.3460
R4 (Long Breakout) – 1.3482
R5 (Breakout Target 1) – 1.3508
R6 (Breakout Target 2) – 1.3519

S1 – 1.3429
S2 – 1.3422
S3 (Range Support – Buy) – 1.3414
S4 (Short Breakout) – 1.3392
S5 (Breakout Target 1) – 1.3366
S6 (Breakout Target 2) – 1.3355

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

Central Pivot Point – 1.3479
R1 – 1.3581
R2 – 1.3638
R3 – 1.3740
R4 – 1.3841

S1 – 1.3422
S2 – 1.3320
S3 – 1.3263
S4 – 1.3205

In monthly terms, for USD/CAD we have the following pivots:

Central Pivot Point – 1.3283
R1 – 1.3560
R2 – 1.3711
R3 – 1.3988
R4 – 1.4265

S1 – 1.3132
S2 – 1.2855
S3 – 1.2704
S4 – 1.2553

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