USD/CAD: Trading the Canadian Ivey PMI Apr 2012

The  Canadian Ivey  PMI (Purchasing Managers’ Index) is   based on a survey of purchasing managers. Respondents are surveyed for their view of the economy and business conditions in Canada.  A reading which is higher than the market forecast is bullish for the Canadian dollar.

Here are all the details, and 5 possible outcomes for USD/CAD.

Published on Thursday at 14:00 GMT.

Indicator Background

Market analysts are always interested in the views of purchase managers on the economy, as the latter are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of future economic trends.

The index has been steadily rising for the  past four months, hitting 66.5 in March. This was well above the market forecast of 62.1, and was the index’s best  performance since April 2011. The market forecast for  April calls for a slight correction to 64.8. Will the index surprise the markets and continue on its  upward swing this month?  

Sentiments and levels

The Canadian economy  produced some weak economic data in March, such as  poor Retail Sales. Higher oil prices are bullish for the loonie, but unless there are some strong employment figures later in the week, traders should expect the Canadian currency to continue drifting in the same range.

Technical levels, from top to bottom: 1.0070, 1.0030, 1.00, 0.9950, 0.99,  0.9870 and 0.9780.

5 Scenarios

1. Within expectations: 62.0 to 68.0: In such a case, USD/CAD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 68.1 to 71.0: An unexpected higher reading can send the pair  below one support level.
3. Well above expectations: Above 71.0: The chances of a sharp expansion are low. Such an outcome would prop up the loonie, and a second  support level  might be broken as a result.
4. Below expectations:  59.0 to 61.9: A drop  in the  index  could  push USD/CAD upwards  and break  one line of resistance.
5. Well below expectations: Below 58.9: Such a scenario would indicate further weakness in the Canadian economy.  This readings  would likely push the  pair upwards, breaking two or more lines of resistance.

For more about the Canadian dollar, see the USD/CAD forecast.