Friday’s trade saw USD/CAD within the range of 1.3163-1.3300. The pair closed at 1.3201, ticking up 0.02% on a daily basis, while marking the first gain in the past three trading days. The daily low has been the lowest level since August 25th, when a low of 1.3144 was recorded.
At 9:49 GMT today USD/CAD was gaining 0.40% for the day to trade at 1.3253. The pair attempted to test the upper range breakout level (R4), as it touched a daily high at 1.3272 at 8:40 GMT.
Today the cross may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
United States
Chicago Manufacturing Survey
The Chicago Purchasing Managers’ Index (PMI) probably slowed down to a reading of 54.5 in August, according to expectations, from 54.7 during the prior month. The latter has been the highest reading since January 2015, when the PMI came in at 59.4. The index reflects business conditions in the region’s manufacturing sector and is interrelated with the Manufacturing Index, published by the Institute for Supply Management (ISM). A reading above the key level of 50.0 is indicative of expansion in manufacturing activity. In case the PMI lowered more than forecast, this would have a moderate bearish effect on the US dollar. The MNI Deutche Börse Group will release the official reading of the Chicago barometer at 13:45 GMT.
Canada
Current Account
The deficit on Canadian current account probably narrowed to CAD 16.9 billion in the second quarter of the year, according to expectations, from a gap of CAD 17.5 billion in Q1. If so, it would be the 27th consecutive three-month period, when a deficit was registered. A country with a gap on its current account is a net borrower from the rest of the world, as it consumes more than it produces. This way foreign liabilities are created. In case Canadas current account deficit narrowed more than expected in Q2, the loonie would receive support. Statistics Canada is to release the official data at 12:30 GMT.
Correlation with other Major pairs
Taking into account the week ended on August 30th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:
USD/CAD to EUR/USD (0.7839, or strong)
USD/CAD to GBP/USD (0.7594, or strong)
USD/CAD to NZD/USD (0.0099, or very weak)
USD/CAD to USD/CHF (-0.8056, or very strong)
USD/CAD to AUD/USD (-0.8286, or very strong)
USD/CAD to USD/JPY (-0.8792, or very strong)
1. During the examined period USD/CAD moved almost equally in the opposite direction with USD/CHF, AUD/USD and USD/JPY.
2. USD/CAD moved strongly in one and the same direction with EUR/USD and GBP/USD during the period.
3. USD/CAD moved almost independently compared to NZD/USD in the past week.
Bond Yield Spread
The yield on Canadian 2-year government bonds went as high as 0.429% on August 28th, or the highest level since August 13th (0.448%), after which it slid to 0.416% at the close to add 1.5 basis points (0.015 percentage point) on a daily basis. It has been the fourth consecutive trading day of gains.
The yield on US 2-year government bonds climbed as high as 0.735% on August 28th, or the highest level since August 19th (0.738%), after which it fell to 0.724% at the close to add 2.4 basis points (0.024 percentage point) for the day, while marking a fourth successive trading day of gains.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, expanded to 0.308% on August 28th from 0.299% during the prior day. The August 28th yield spread has been the most notable one since August 14th, when the difference was 0.315%.
Meanwhile, the yield on Canadian 10-year government bonds soared as high as 1.463% on August 28th, after which it slid to 1.444% at the close to lose 2 basis points (0.02 percentage point) compared to August 27th. It has been the first drop in the past four trading days.
The yield on US 10-year government bonds climbed as high as 2.197% on August 28th, after which it slipped to 2.184% at the close to lose 0.007 percentage point on a daily basis. It has been the first drop in the past four trading days.
The spread between 10-year US and 10-year Canadian bond yields expanded to 0.740% on August 28th from 0.727% during the prior day. The August 28th yield difference has been the largest one since August 25th, when the spread was 0.748%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.3214
R2 – 1.3226
R3 (range resistance – green on the 1-hour chart) – 1.3239
R4 (range breakout – red on the 1-hour chart) – 1.3276
S1 – 1.3188
S2 – 1.3176
S3 (range support – green on the 1-hour chart) – 1.3163
S4 (range breakout – red on the 1-hour chart) – 1.3126
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.3233
R1 – 1.3322
R2 – 1.3443
R3 – 1.3532
S1 – 1.3112
S2 – 1.3023
S3 – 1.2902
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