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Canadian Dollar Advances As Ivey Purchasing Managers Index Beats Forecasts

Canadian Dollar Advances As Ivey Purchasing Managers Index Beats Forecasts

2011-09-07 18:40:00
Trang Nguyen,
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THE TAKEAWAY: Canadian Ivey Purchasing Managers Index unexpectedly jump > Ivey Price Index Climbed > Canadian Dollar Strengthens

Ivey Purchasing Managers Index (PMI), a monthly measure of changes in purchasing activity across Canada, surprisingly climbed to 56.4 on a seasonally adjusted basis in August from 46.8 in July. A figure rebounded after four consecutive declines that spurred business optimism and reinforced strong economic growth outlook in Canada for the third quarter. The reading also beat the economists’ median forecasts of 52.2 from the Bloomberg survey.

Canadian_Dollar_Advances_As_Ivey_Purchasing_Managers_Index_Beats_Forecasts_body_Chart_3.png, Canadian Dollar Advances As Ivey Purchasing Managers Index Beats Forecasts

Prepared by Trang Nguyen

The largest contribution to the unexpected surge in the Ivey purchasing index was the Price Index which came in at 64.0 for August. Besides, other two components, Inventories Index and the Employment Index, also rose to 57.9 and 52.5, respectively. The Supplier Deliveries Index, however, decreased to 45.6. The overall purchasing index above 50 suggested higher purchases by corporate executives than in the previous month. Since businesses started to increase purchases and spending in response to growing demand for their goods and services, investors have been confident in economic expansion in the coming months.

EUR/USD 1-minute Chart: September 7, 2011

Canadian_Dollar_Advances_As_Ivey_Purchasing_Managers_Index_Beats_Forecasts_body_Picture_7.png, Canadian Dollar Advances As Ivey Purchasing Managers Index Beats Forecasts

Charts created using Strategy Trader– Prepared by Trang Nguyen

Five minutes before the data release, the Canadian dollar lose its ground against its major peers as a number of traders guess that the index might follow the contraction last month and could not meet expectations. The one minute EURCAD chart above demonstrated the currency pair’s jump of more than 130 pips from 1.3870 to 1.3902. Besides, the Relative Strength Indicator (RSI) above 70 showed that the currency pair was overbought. However, the purchasing index printed much better than forecast, lifting the loonie. The “bearish engulfing” pattern after the upward momentum signified that EUR/CAD buyers were losing control. The pair proceeded to bearish stance as an aftermath probably due to investors selling off their euro in favor of the loonie. The pair plunged to1.3870 after twenty minutes. The purchasing index figure reinforced the relief that the Canadian growth would resume for the rest of the year, led by business investment and household expenditures. In contrast, intensified sovereign debt crisis in Eurozone decreased the euro’s value.

Written by Trang Nguyen, DailyFX Research Team

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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