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USD/CAD: Trading the Canadian Ivey PMI Index Mar 2012

The Canadian PMI (Purchasing Managers’ Index) is an important leading indicator which focuses on the services sector. As the PMI comes out at the beginning of each month, analysts and traders look closely at the index readings for any hint of a market trend. A reading which is higher than the market forecast is bullish for the Canadian dollar.

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

Published on Tuesday at 15:00 GMT.

Indicator Background

The PMI is an important indicator is  based on a comprehensive survey of purchasing managers, who are surveyed about business conditions and their expectations as to how the economy will perform. Analysts  place a great  deal of value on PMI readings, which have the potential to be market-movers.

The index climbed up to 64.1 in February, easily surpassing the market forecast of 58.6.  Aslo, this was  the best   reading recorded since June 2011. The market forecast calls for a slight drop to 62.1. If the  index can beat the forecast, it will have done  so for four consecutive months, which would bode well for  the loonie.

Sentiments and Levels

GDP was up a healthy 0.4% last month, and the rising price of oil means foreigners must purchase more Canadian dollars  to buy Canadian oil. So, the  overall sentiment is  bearish on USD/CAD prior to this release.

Technical levels, from top to bottom: 1.02, 1.0143, 1.0070, 1.00, 0.99, 0.9830 and 0.9780.

5 Scenarios

  1. Within expectations: 60.0 to 64.0: In this case, USD/CAD may fluctuate slightly within range, with a small chance of breaking higher.
  2. Above expectations: 64.1. to 66.0: An unexpected higher reading can send the pair below one support level.
  3. Well above expectations: Above 66.0: The chances of such an outcome are low. Such a scenario would push USD/CAD downwards, and a second support level might be broken as a result.
  4. Below expectations: 58.0 to 59.9: A smaller than forecast gain would create pressure on the loonie and one resistance line could be broken.
  5. Well below expectations: Below 58.0: In this case, USD/CAD could break two or more resistance lines.

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

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.