Yesterday’s trade saw USD/CAD within the range of 1.2970-1.3075. The pair closed at 1.3057, gaining 0.17% on a daily basis, while marking the first gain in the past six trading days. The daily low has been the lowest level since August 13th, when a low of 1.2955 was recorded.
At 8:57 GMT today USD/CAD was down 0.01% for the day to trade at 1.3057. The pair tested the daily S2 level, as it touched a daily low at 1.3036 at 8:34 GMT.
Today the cross may be influenced by a number of macroeconomic reports and other events as listed below.
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 business week ended on October 2nd, probably decreased to 274 000, according to market expectations, from 277 000 in the previous week. The latter has been the highest number of claims since the business week ended on August 28th.
The 4-week moving average, an indicator lacking seasonal effects, was 270 750, marking a decrease of 1 000 compared to the preceding weeks unrevised average.
The business week, which ended on September 25th has been the 30th consecutive week, when jobless claims stood below the 300 000 threshold.
Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or dropped further, this would have a moderate bullish effect on the US dollar.
The number of continuing jobless claims probably rose to the seasonally adjusted 2 205 000 during the business week ended on September 25th, from 2 191 000 in the prior week. The latter has been the lowest level for insured unemployment since November 11th 2000, when 2 161 000 claims were reported. The figure represented a drop by 53 000 compared to the revised up number of claims reported in the week ended on September 11th. This indicator reflects 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 12:30 GMT.
FOMC Minutes
At 18:00 GMT the Federal Open Market Committee (FOMC) will release the minutes from its meeting on policy held on September 16th-17th. The minutes offer detailed insights on FOMC’s monetary policy stance. This release is closely examined by traders, as it may provide clues over interest rate decisions in the future. High volatility is usually present after the publication.
As the Federal Reserve abstained from introducing a rate hike in September, and after the downbeat report on Non-farm Payrolls last Friday, expectations of a rate raise by the end of the year have been somewhat curbed.
However, in a statement at the University of Massachusetts Fed Chair Janet Yellen noted that an initial increase in the target range for the federal funds rate later in 2015 would still be appropriate. ”If the FOMC were to delay the start of the policy normalization process for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession. In addition, continuing to hold short-term interest rates near zero well after real activity has returned to normal and headwinds have faded could encourage excessive leverage and other forms of inappropriate risk-taking that might undermine financial stability. For these reasons, the more prudent strategy is to begin tightening in a timely fashion and at a gradual pace, adjusting policy as needed in light of incoming data”, Yellen said.
Canada
Housing Starts
Housing starts in Canada probably fell to the seasonally adjusted annual level of 200 000 in September, according to market expectations, from 216 900 in August. The latter has been the highest number reported since September 2012, when a level of 224 000 was reached. Housing starts are considered as a key indicator, reflecting the strength of the nation’s housing sector. In case the number of housing starts dropped more than expected, this would have a moderate bearish effect on the loonie. Canada’s Mortgage and Housing Corporation is to release the official data at 12:15 GMT.
Yesterday the total value of building permits issued by the government was reported to have fallen 3.7% in August compared to a month ago to reach CAD 7.55 billion. The result confounded market expectations, pointing to a 0.3% increase. It has been the first drop in the past three months due to lower demand in the majority of regions. Julys performance has been revised up to a 0.7% increase from a 0.6% gain previously.
Bond Yield Spread
The yield on Canadian 2-year government bonds went as high as 0.543% on October 7th, or the highest level since October 5th (0.559%), after which it slid to 0.531% at the close to add 2.3 basis points (0.023 percentage point) compared to October 6th.
The yield on US 2-year government bonds climbed as high as 0.641% on October 7th, or the highest level since October 2nd (0.680%), after which it fell to 0.629% at the close to add 2 basis points (0.02 percentage point) compared to October 6th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.098% on October 7th from 0.101% on October 6th. The October 7th yield difference has been the lowest one since October 5th, when the spread was 0.096%.
Meanwhile, the yield on Canadian 10-year government bonds soared as high as 1.482% on October 7th, or the highest level since September 30th (1.484%), after which it closed at 1.456% to add 3.5 basis points (0.035 percentage point) compared to October 6th. It has been the second increase in the past eight trading days.
The yield on US 10-year government bonds climbed as high as 2.086% on October 7th, or the highest level since September 30th (2.104%), after which it slipped to 2.070% at the close to add 3.5 basis points (0.035 percentage point) compared to October 6th.
The spread between 10-year US and 10-year Canadian bond yields remained unchanged at 0.614% on October 7th. The latter has been the lowest yield difference since October 2nd, when the spread was 0.588%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.3067
R2 – 1.3076
R3 (range resistance) – 1.3086
R4 (range breakout) – 1.3115
S1 – 1.3047
S2 – 1.3038
S3 (range support) – 1.3028
S4 (range breakout) – 1.2998
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.3251
R1 – 1.3355
R2 – 1.3561
R3 – 1.3665
S1 – 1.3045
S2 – 1.2941
S3 – 1.2735
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