The Ivey Purchasing Manager`s Index is a composite PMI index of Canada’s month to month change in economic activity. It is compiled by the Ivey Business School using end of month data and covering all aspects of the Canadian Economy. The index has been trending higher and near long terms over the past year indicating continued expansion within the country`s borders. The most recent read, released today, came in at 63.8% and well above expectations.
Consensus estimates were in the range of 60.2% and up nearly a point from the previous month’s 59.6%. This month’s read blows past estimates by a full 3.6% and indicative of robust expansion within Canada. The news is not all positive however. This month’s gains are driven primarily by increases in prices and inventories, offset by slowing of activity in both labor and deliveries. Of note, supplier deliveries are shrinking and have been for the better part of 2 years.
The USD/CAD held steady on the news and is trading above a near term support. Support is near 1.2720 and a previous resistance level. This level is consistent with the neckline of a Head & Shoulders reversal pattern which was broken last week. If it confirms we can expect to see the pair continue higher over the next several weeks. The USD is being propelled by strong economic data and a firm expectation of interest rate hike by December. Upside target for resistance is 1.2920, a break above there would be bullish. No other major market moving data is expected for this pair this week.
The EUR/CAD held firm on the news although it appears to be heading lower. The pair is trading within a range with support at 1.4500 and resistance at 1.5000 and little to move it out of that range in the near to short term. Today’s data confirms that Canada is still growing but with trouble spots within the economy while EU data points to some firming.
EU Composite PMI came in a hair above expectation at 56.0% with producer level inflation running a little hot as well. The all EU PPI came in at 0.6% for the month and 2.7% YOY, consistent with economic expansion and the onset of ECB tightening. The pair is now trading at the 1.4800 level, near the midpoint of the range, and a potentially significant level for traders.
A break below could take the pair to the bottom of the range while a bounce from it could go as high as the top of the range.
The GBP/CAD also held firm on the news and is trading near the midpoint of a long term trading range. The pair is bouncing from potential support at 1.6650 but remains below the neckline of an apparent Head & Shoulders reversal. This neckline is near 1.6750 and needs to be broken before taking bullish trades. Today’s bounce, with such a break, would confirm reversal within the trading range.
If confirmed this pattern could lead to a move back up to recent highs near 1.7190. A break above there would be bullish with a target near the top of the range at 1.7800.
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