Good morning, traders. As we wrote in yesterday’s brief, the market is trading on sentiments. Investors are keeping eyes on the US labor market data and the Fed interest rate decision. We are likely to see some big fluctuations in the market throughout the week. Let’s see what awaits us today.

Top Economic Events Today

Eurozone – EUR

Services PMI – From 8:15 to 9:00 (GMT), the market will be releasing the Purchasing Managers’ Index (PMI) for services from Spain, Italy, France, and Germany. Most of them are expected to have gained from their previous release.  

Great Britain Pound – GBP

Services PMI – Immediately after the European PMI figures, we have the same data coming out for the UK. Folks, this data is comparatively more important than four services PMI’s from the Eurozone. Confused? The Eurozone is releasing four Services PMI figures, but the market will not be able to react quickly with gaps. Whilst, the Services PMI from the UK will get most of the attention. The expected quick response from investors will cause some fluctuations in the market.

Canadian Dollar – CAD

Trade Balance – Statistics Canada is expected to release the figures at 13:30 (GMT) and at the same time, we will see the trade balance figures from the US. The trade balance is the difference in value between imported/exported goods and services during the reported month. A positive number indicates that more goods were exported than imported.

About 75% of Canadian exports are purchased by the US. The Canadian exports are expected to increase this month. Since Canada is an export-oriented country, the increase in exports increases the demand for the Canadian dollar and ultimately the exchange rate.

US Dollar – USD

Trade Balance – The Bureau of Economic Analysis will release the US and Canada’s Trade Balance at 13:30 (GMT).

If the trade balance of one economy is positive and the other one is negative, then there will be good one-sided movement in the USD/CAD. Else, we will have to trade them separately with other currencies.

ISM Non-Manufacturing PMI – Lastly at 15:00 (GMT), we have services PMI from the US. The Institute for Supply Management is expected to release a slightly negative figure of 59.2 vs. 60.1 in the month of October.

USD/CAD – Bears Gains Momentum

The technical side of the pair is oversold enough to give CAD a pullback. It’s highly dependant on the Canadian Trade Balance data today.

USD/CAD – 4-Hour Chart

On the 4-hour chart, we can see the pair has broken below a bullish trendline. Is this the beginning of a new bearish trend? We can’t be sure at this point. The leading indicators RSI and Stochastics are massively oversold at 11.7 and 12.86.   

USD/CAD – Key Trading Levels

Support     Resistance

1.2643        1.2714

1.2614        1.2756

1.2572        1.2785

Key Trading Level:    1.2685

USD/CAD Trading Plan

We need to keep a close eye on $1.2685 as selling is preferred below this level with a stop loss above $1.2730 and take profit at $1.2630. Preferably, wait for the data before entering the market. Good luck and trade with care!