[Calxy]

The market will get its first peak at what the U.S. employment report might look like on Friday. The ADP employment report and the ISM non-manufacturing survey will be released today. We do not put too much faith in the ADP numbers, but a significant deviation from the negative 350K reading expected could temporarily spill over into the FX market. The employment component of the non-manufacturing ISM data, on the other hand, has a much stronger and reliable correlation with nonfarm payroll data. The employment component increased from 39.0 in May to 43.4 in June and another meaningful increase will get risk seekers all giddy. The headline non-manufacturing ISM survey is expected to increase from
47.0 to 48.0.

Short-Term Outlook: Support at 1.0741 and 1.0699 Expected to Attract Buying Interest

With USD/CAD overbought on the hourly studies, a short-term retracement to support at 1.0741 and ascending trendline support at 1.0699 is expected during early trading. However, selloffs toward these levels are likely to attract short-term buying interest, with an hourly close above 1.0789 highlighting 1.0842.

Medium-Term Outlook: Must Close Above 1.0791 in Order to Foster Retracement

USD/CAD must close above 1.0791 on a daily closing basis in order to sustain the retracement potential that is present in the hourly studies. However, failure to close above this level will leave USD/CAD vulnerably to further selloffs. The inability to close above this level on a daily basis would likely postpone any price extensions to the topside and produce downside momentum that would bring support at 1.0573 into view. But, the oversold nature of the daily studies is becoming an increasingly important obstacle to further strong selloffs.

CAD Crosses – Short-Term Outlook:

EUR/CAD: Valuation a Concern

EUR/CAD is extremely oversold on the daily studies and selloffs toward 1.5460 and 1.5418 are expected to attract short-term buying interest for a test of resistance at 1.5540 and 1.5773. A break above 1.5773 will lend further momentum to the rally for a test of 1.5808.

GBP/CAD: Support at 1.8192 and 1.8120 Expected to Attract Buying Interest
Daily valuation is less of an obstacle to GBP/CAD than EUR/CAD moves. Selloffs to support at 1.8192 and 1.8120 are expected to attract short-term buying interest in GBP/CAD for a move to initial resistance at 1.8412. An hourly close above this level would affirm our bullish view, targeting 1.8462 thereafter. Place stops below 1.8125 on an hourly closing basis.

CAD/JPY: Heavily Overbought
The daily studies indicate that CAD/JPY is heavily overbought, potentially limiting further upside moves. Rallies toward resistance at 89.29 and 89.71 are expected to attract short-term selling interest for an attempt to register an hourly close below 88.38. A close below this level would project additional losses toward 87.70.