USD/CAD: Trading the Canadian Ivey PMI Jun 2012

The  Canadian PMI is based on a survey of purchasing managers in a wide range of sectors and geographic location. Respondents are surveyed for their view of the economy and business conditions in Canada, including employment, prices and new orders. 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 purchasing managers on the economy and attach great significance to PMI readings. The expectations of purchasing managers provides a good snapshot of current economic conditions and possible future economic trends.

The Canadian PMI came in at a disappointing 52.7 points in May,  well below  the market estimate of 62.7. It was the  index’x lowest reading since August 2011.  This was also a four-month low for the index. The forecast for June is even lower, at 51.8 points.  Will the  index surprise the markets and reverse its  downward trend this month?

Sentiments and levels

There are a lot of factors weighing on the Canadian dollar. These include US weakness, lower oil prices and the deepening crisis in Europe. Thus, the overall sentiment is  bullish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.0660, 1.0523, 1.0423, 1.03, 1.0245 and 1.02.

5 Scenarios

1. Within expectations: 50.0.0 to 54.0: In such a case, USD/CAD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 54.1 to 56.0: An unexpected higher reading can send the pair  below one support  level.
3. Well above expectations: Above 56.0: The likelihood of a sharp expansion is low. Such an outcome could push USD/CAD downwards, and a second  support level  might be broken as a result.
4. Below expectations: 48.0 to 49.9: A sharper decrease than forecast could push  the loonie  downwards, and the pair could break one line of resistance.
5. Well below expectations: Below 48.0: Such an outcome would indicate economic contraction. This would likely push the pair upwards, possibly breaking a second resistance line.

For more about the loonie, see the USD/CAD forecast.