Forex Market: USD/CAD daily trading forecast

Friday’s trade saw USD/CAD within the range of 1.2897-1.3023. The pair closed at 1.2943, falling 0.57% on a daily basis, while extending the loss from Thursday. It has been the seventh loss in the past eight trading days. The daily low has been the lowest level since July 29th, when a low of 1.2859 was registered. In weekly terms, USD/CAD lost 1.57% last week, while extending the loss during the week ended on October 4th. Last weeks decline has been the steepest one since the week ended on April 19th, when a 2.48% drop was recorded.

At 12:18 GMT today USD/CAD was losing 0.12% for the day to trade at 1.2933. The pair touched a daily low at 1.2902 at 7:40 GMT. It has been a test of the low from Friday and the range support level (S3). Fridays low is a possible level of support. If broken, the next possible support may be the 38.2% Fibonacci level of 1.2868, reflecting the ascent from May 14th low to September 29th high.

No relevant macroeconomic reports, which would influence USD/CAD trading, are scheduled for release today.

Thanksgiving Day in Canada

Today is the Thanksgiving Day holiday in Canada, observed on every second Monday in October. It celebrates the bounties and the blessings of the past year. Thanksgiving is a statutory holiday in the majority of provinces in Canada, with the exception of jurisdictions such as Prince Edward Island, Newfoundland and Labrador, New Brunswick, and Nova Scotia. In these provinces it is considered as an optional holiday. Banks in Canada are to remain closed.

Correlation with other Majors

Taking into account the week ended on October 11th 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 USD/CHF (0.9499, or very strong)
USD/CAD to USD/JPY (0.1436, or weak)
USD/CAD to GBP/USD (-0.5638, or strong)
USD/CAD to NZD/USD (-0.8294, or very strong)
USD/CAD to AUD/USD (-0.9256, or very strong)
USD/CAD to EUR/USD (-0.9871, or very strong)

1. During the examined period USD/CAD moved almost equally in one and the same direction with USD/CHF, while moving almost equally in the opposite direction compared to NZD/USD, AUD/USD and EUR/USD.

2. USD/CAD moved strongly in the opposite direction compared to GBP/USD during the past week.

3. The correlation between USD/CAD and USD/JPY was insignificant during the period in question.

Bond Yield Spread

The yield on Canadian 2-year government bonds went as high as 0.567% on October 9th, or the highest level in more than two months, after which it slid to 0.560% at the close to add 0.006 percentage point compared to October 8th. It has been the third consecutive trading day of increase.

The yield on US 2-year government bonds climbed as high as 0.657% on October 9th, or matching the high from the previous day, after which it fell to 0.641% at the close to add 0.004 percentage point compared to October 8th, while marking a third consecutive trading day of increase.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.081% on October 9th from 0.083% on October 8th. The October 9th yield difference has been the lowest one since October 2nd, when the spread was 0.076%.

Meanwhile, the yield on Canadian 10-year government bonds soared as high as 1.525% on October 9th, or the highest level since September 28th (1.530%), after which it closed at 1.519% to add 1.3 basis point (0.013 percentage point) compared to October 8th. It has been the third consecutive daily increase.

The yield on US 10-year government bonds climbed as high as 2.138% on October 9th, or the highest level since September 28th (2.169%), after which it slipped to 2.090% at the close to lose 1.2 basis point (0.012 percentage point) compared to October 8th. It has been the first drop in the past three trading days.

The spread between 10-year US and 10-year Canadian bond yields narrowed to 0.571% on October 9th from 0.596% on October 8th. The October 9th yield difference has been the lowest one since June 28th, when the spread was 0.434%.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:

R1 – 1.2955
R2 – 1.2966
R3 (range resistance) – 1.2978
R4 (range breakout) – 1.3012

S1 – 1.2931
S2 – 1.2920
S3 (range support) – 1.2908
S4 (range breakout) – 1.2874

By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:

Central Pivot Point – 1.3005
R1 – 1.3114
R2 – 1.3284
R3 – 1.3393

S1 – 1.2835
S2 – 1.2726
S3 – 1.2556