Yesterday’s trade saw USD/CAD within the range of 1.1925-1.2018. The daily high has also been the highest level since April 30th 2009. The pair closed at 1.1951, losing 0.05% on a daily basis.
At 8:59 GMT today USD/CAD was up 0.01% for the day to trade at 1.1950. The pair touched a daily high at 1.1975 at 6:35 GMT.
Fundamentals
United States
Initial, Continuing jobless claims
The number of people in the United States, who filed for unemployment assistance for the first time during the week ended on January 9th, probably decreased to 291 000 from 294 000 in the prior week. The 4-week moving average, an indicator lacking seasonal effects, was 290 500, marking a decrease of 250 from the previous weeks unrevised average of 290 750.
Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims fell more than projected, this would have a bullish effect on the greenback.
The number of continuing jobless claims probably fell to the seasonally adjusted 2 400 000 during the week ended on January 2nd, from 2 452 000 in the previous week. The latter was an increase by 101 000 compared to the revised down number of claims, reported during the week ended on December 19th. This indicator represents the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago.
The Department of Labor is to release the weekly report at 13:30 GMT.
Producer prices
United States’ annualized producer price inflation probably slowed down to 1.0% in December, according to the median estimate by experts, from 1.4% in November. If so, this would be the lowest producer inflation since February, when the corresponding index (PPI) climbed at an annualized pace of 0.9%. This index reflects the change in prices of over 8 000 products, sold by manufacturers during the respective period. The Producer Price Index (PPI) differs from the Consumer Price Index (CPI), which measures the change in prices from consumer’s perspective, due to subsidies, taxes and distribution costs of different types of manufacturers in the country. The simple logic behind this indicator is that if producers are forced to pay more for goods and services, they are more likely to pass these higher costs to the end consumer. Therefore, the PPI is considered as a leading indicator of consumer inflation. Lower-than-expected producer prices would usually have a bearish effect on the greenback.
The nation’s annualized core producer price inflation, which excludes prices of volatile categories such as food and energy, probably accelerated to 1.9% in December from 1.8% in the prior month. If so, this would be the highest core producer inflation since May, when the corresponding annualized PPI gained 2.0%. This indicator is quite sensitive to changes in aggregate demand, thus, it can be used as a leading indicator for economy. However, because of its restrained scope, it is not suitable for future inflation forecasts. The Bureau of Labor Statistics is expected to report the official PPI performance at 13:30 GMT.
Philadelphia Manufacturing data
The Philadelphia Fed Manufacturing Index probably fell to a reading of 20.0 in January from 24.5 index points during the previous month. If so, this would be the lowest level since May 2014, when a reading of 17.8 was reported. The index is based on a monthly business survey (the Business Outlook Survey), measuring manufacturing activity in the third district of the Federal Reserve, Philadelphia. Participants give their opinion about the direction of business changes in overall economy and different indicators of activity in their companies, such as employment, working hours, new and existing orders, deliveries, inventories, delivery time, price etc. The survey is conducted every month since May 1968. The results are presented as the difference between the percentages of positive and negative projections. A level above zero is indicative of improving conditions, while a level below zero is indicative of worsening conditions. The Federal Reserve Bank of Philadelphia is expected to release the official results from the survey at 15:00 GMT. Lower-than-expected index readings would have a bearish effect on the greenback.
Modest growth
The Beige Book report, released on Wednesday revealed that most regions in the US recorded “modest” or “moderate” economic growth, supported by increased household purchases.
“Consumer spending increased in most districts, with generally modest year-over-year gains in retail sales,” the Fed said in its Beige Book, based on reports from its 12 regions gathered on or before January 5th, as reported by Bloomberg. Several districts “expect somewhat faster growth over the coming months.”
Yesterday monthly retail sales were reported to have dropped 0.9% in December, after a month ago they marked a 0.4% increase.
“Maybe the optimism a month ago got a little too heated,” said Guy Berger, U.S. economist at RBS Securities Inc. in Stamford, Connecticut, cited by the same media. “It’s a weak number but it follows some really strong ones and I don’t think it changes my general feeling on how the economy and consumers are doing.”
Morgan Stanley and JP Morgan Chase & Co. were among companies, that revised down their fourth-quarter consumer spending forecasts, following the retail sales report. Morgan Stanley cut its forecast for spending to 4.1% from 4.4%, while JP Morgan reduced its projection to 4.3% from 4.7%.
Canadian bond yields at record low
Demand for fixed-income assets soared, as prices of stocks and commodities fell amid global economic growth concerns. The yield on Canadian benchmark 10-year government bonds decreased eight basis points, or 0.08 percentage point, to reach 1.516%, a new record low level. The prior record low was at 1.565%, registered in July 2012.
The Bank of Canada is likely to revise down its growth forecast, as it is expected to release its monetary policy report next week. According to Morgan Stanley analysts, there is a one in three chance that the central bank will reduce borrowing costs this year. The Bank of Canada last forecast from October pointed to a 2.4% growth in 2015.
In addition, Morgan Stanley reduced its projection of Canadas growth to 1.8% in 2015 from 2.4%, as projected in December.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.1965. In case USD/CAD manages to breach the first resistance level at 1.2004, it will probably continue up to test 1.2058. In case the second key resistance is broken, the pair will probably attempt to advance to 1.2097.
If USD/CAD manages to breach the first key support at 1.1911, it will probably continue to slide and test 1.1872. With this second key support broken, the movement to the downside will probably continue to 1.1818.
The mid-Pivot levels for today are as follows: M1 – 1.1845, M2 – 1.1892, M3 – 1.1938, M4 – 1.1985, M5 – 1.2031, M6 – 1.2078.
In weekly terms, the central pivot point is at 1.1828. The three key resistance levels are as follows: R1 – 1.1929, R2 – 1.1990, R3 – 1.2091. The three key support levels are: S1 – 1.1767, S2 – 1.1666, S3 – 1.1605.
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