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USD/CAD Fundamental Forecast – May 5, 2016

By:
James Hyerczyk
Updated: May 4, 2016, 22:05 UTC

The USD/CAD extended its winning streak to two days as support for the Canadian Dollar continued to erode. Since it briefly touched 80 cents US on Friday,

USD/CAD

The USD/CAD extended its winning streak to two days as support for the Canadian Dollar continued to erode. Since it briefly touched 80 cents US on Friday, the Loonie has given back more than two cents. The last reading showed the USD/CAD at 1.2847, up 0.0124 or +0.97%.

While weaker oil and equity markets weighed on the Canadian Dollar Tuesday, on Wednesday, prices were influenced by economic data. New data showed that Canada’s trade deficit for March grew to a record $3.4 billion, which was much more than the $1.4 billion deficit economists had been expecting.

Canada’s trade surplus with the United States narrowed to $1.5 billion in March, the lowest surplus since December 1993.

The March trade figures suggest the first quarter ended on a weak note. While CIBC still forecasts growth in the quarter to come at an annualized rate of three to 3.5 per cent, they suggest it means the Canadian economy lost much of its momentum after a strong December and January for output.

In other news, traders were reacting to the ADP Non-Farm Employment Change report which showed the private sector added only 156,000 jobs to the economy in April. Traders were expecting at least 195,000 with some predictions as high as 205,000.

Non-farm productivity declined 1% in the first quarter vs. fourth quarter, according to preliminary estimate from the Labor Department. Consensus projections called for a 1.2% decrease. Labor costs jumped 4.1%, above estimates for a 3.5% rise.

Later today investors will get the opportunity to react to the latest U.S. Final Services report, ISM Non-Manufacturing PMI and Factory Orders.

Finally, U.S. crude oil futures pared gains on Wednesday and Brent crude turned negative after U.S. government data showed crude inventories rose more than expected.

U.S. commercial crude stockpiles rose by 2.8 million barrels in the previous week to a total of 543.4 million barrels. Traders were looking for an increase of 1.7 million barrels.

Gasoline stocks increased by about 500,000 barrels last week, and distillate fuel inventories fell by 1.3 million barrels. Weekly U.S. crude production figures showed output fell by about 113,000 barrels per day.

June crude oil futures are currently trading at $44.99, up $0.58 or +1.31%. Oil prices were also underpinned by the possibility of a drop in production due to the wildfires in the Canadian oil province of Alberta.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

Cur. Event Actual Forecast Previous
  USD API Weekly Crude Oil Stock 1.265M 0.500M -1.070M
  USD API Weekly Cushing Crude Oil Stock 0.382M   1.900M
  NZD Employment Change (QoQ) (Q1) 1.2% 0.7% 0.9%
  NZD Unemployment Rate (Q1) 5.7% 5.5% 5.3%
  USD FOMC Member Lockhart Speaks      
  JPY Japan – Greenery Day      
  EUR German Services PMI (Apr) 54.5 54.6 54.6
  EUR Markit Composite PMI (Apr) 53.0 53.0 53.0
  EUR Services PMI (Apr) 53.1 53.2 53.2
  GBP Construction PMI (Apr) 52.0 54.0 54.2
  EUR Retail Sales (MoM) (Mar) -0.5% -0.1% 0.3%
  EUR German Buba President Weidmann Speaks      
  USD ADP Nonfarm Employment Change (Apr) 156K  196K 200K
  USD Nonfarm Productivity (QoQ) (Q1) -1.0% -1.4% -2.2%
  USD Trade Balance (Mar) -40.4B -41.50B -47.10B
  USD Unit Labor Costs (QoQ) (Q1) 4.1% 3.3% 3.3%
  CAD Trade Balance (Mar) -3.4B -1.40B -1.91B
  USD Markit Composite PMI (Apr)     51.7
  USD Services PMI (Apr)   52.1 52.1
  USD Factory Orders (MoM) (Mar)   0.6% -1.7%
  USD ISM Non-Manufacturing Employment (Apr)     50.3
  USD ISM Non-Manufacturing PMI (Apr)   54.7 54.5
  USD Crude Oil Inventories   1.695M 1.999M
  USD Cushing Crude Oil Inventories     1.746M
  USD FOMC Member Kashkari Speaks      
  AUD HIA New Home Sales (MoM) (Mar)     -5.3%
  AUD Retail Sales (MoM) (Mar)   0.3% 0.0%
  AUD Trade Balance (Mar)   -2.900B -3.410B
  CNY Caixin Services PMI (Apr)   52.6 52.2

 

30-Minute USD/CAD

Upcoming Economic Events that you should be monitoring:

Thursday, May 5, 2016

Cur. Event Actual Forecast Previous
  JPY Japan – Children’s Day      
  GBP Halifax House Price Index (MoM)   0.1% 2.6%
  GBP Halifax House Price Index (YoY)   9.6% 10.1%
  EUR ECB Economic Bulletin      
  GBP Services PMI (Apr)   53.5 53.7
  USD Initial Jobless Claims   260K 257K
  CAD Building Permits (MoM) (Mar)   -5.0% 15.5%
  USD FOMC Member Bullard Speaks      
  USD FOMC Member Bullard Speaks      
  USD FOMC Member Kaplan Speaks      
  USD FOMC Member Lockhart Speaks      
  USD FOMC Member Williams Speaks      
  AUD RBA Monetary Policy Statement    

Government Bond Auctions

Date Time       Country           Auction

May 04 11:05 Norway Holds bond auction

May 04 11:30 Germany Eur 4bn Apr 2021 Bobl

May 04 11:30 UK Gbp 2.75bn 1.5% 2021 Gilt

May 04 11:50 France Holds bond auction

May 04 17:20 Sweden Details of bond auction on May 11

May 05 10:30 Spain Holds bond auction

May 05 11:00 Austria Holds bond auction

May 05 11:30 UK Gbp 2.5bn 1.5% 2026 Gilt

May 09 17:20 Italy Announces details of bond auction

May 09 N/A Ireland Details of bond auction on May 12

May 10 11:30 Germany Holds I/L bond auction

May 11 11:03 Sweden Holds bond auction

May 11 11:30 Germany Eur 5bn Jun 2018 Schatz

May 12 11:10 Italy Holds bond auction

May 12 17:20 Sweden Details of I/L auction on May 19

May 12 N/A Ireland Holds bond auction

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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