Yesterday’s trade saw USD/CAD within the range of 1.3136-1.3188. The pair closed at 1.3167, rising 0.15% on a daily basis, while extending gains from Wednesday. The daily high was a lower-high test of the high from November 4th, while the latter has been the highest level since October 30th.
At 10:42 GMT today USD/CAD was gaining 0.14% for the day to trade at 1.3185. The pair touched a daily high at 1.3189 at 10:27 GMT, which undershot the upper range breakout level (R4). The pair has been trading above the weekly central pivot level for the past two trading days. Resistance may be encountered at the psychological 1.3200 level, while if the latter is broken, a test of October 29th high at 1.3240 seems probable.
On Friday USD/CAD trading may be influenced by the macroeconomic reports listed below.
Fundamentals
United States
Non-farm Payrolls, Unemployment rate, Average Hourly Earnings
Employers in all sectors of economy in the United States, excluding the farming industry, probably added 180 000 new jobs in October, according to the median forecast by experts, after a job gain of 142 000 in September. The latter has been the lowest figure since March 2015, when 126 000 new jobs were added.
Employment in health care and social assistance increased by 34 000 jobs in September, while professional and business services sector added 31 000 jobs. Retail trade added 24 000 positions, while employment in food services and drinking places expanded by 21 000. On the other hand, employment in the mining industry continued to decrease in September (-10 000), while employment in sectors such as construction, manufacturing, wholesale trade, transportation and warehousing, financial activities and government remained almost unchanged during the month, according to the report by the Bureau of Labor Statistics (BLS).
The non-farm payrolls report presents the total number of US employees in any business, excluding the following four groups: farm employees, general government employees, employees of non-profit organizations, private household employees. The reading, released most often, varies between 10 000 and as much as 250 000 – 300 000 at times when economy is performing well. Despite the volatility and the possibility of large revisions, the non-farm payrolls indicator presents the most timely and comprehensive reflection of the current economic state. Total non-farm payrolls account for 80% of the workers, who produce the entire Gross Domestic Product of the United States. In case of a larger-than-expected gain in jobs in October, demand for the US dollar would be strongly supported.
Average Hourly Earnings probably increased 0.2% in October compared to the prior month, according to market expectations, after remaining flat in September.
The rate of unemployment in the country probably remained steady at 5.1% for a third consecutive month in September, according to expectations. It has been the lowest level since April 2008, when a rate of 5.0% was reported.
The total number of people unemployed shrank to 7.9 million in September from 8.0 million in August. The unemployment rate for adult men (4.7%), adult women (4.6%), teenagers (16.3%), whites (4.4%), blacks (9.2%), Asians (3.6%), and Hispanics (6.4%) showed little or no change during the month. The number of people unemployed for less than 5 weeks increased by 268 000 to 2.4 million in September, while the number of long-term unemployed (those looking for employment for 27 weeks or more) dropped to 2.1 million during the month from 2.2 million in August and comprised 26.6% of the unemployed, according to the BLS.
In case the unemployment rate met expectations or even fell further, this would have a strong bullish effect on the greenback, because of the positive implications for consumer spending. The Bureau of Labor Statistics will release the official employment data at 13:30 GMT.
Canada
Change in employment, Unemployment rate
The number of the employed people in Canada probably increased by 10 000 in October, according to market expectations. In September the number of the employed rose by 12 100, or the most since May, when a number of 58 900 was reported. Compared to 12 months earlier, Canadian employment rose by 161 000 (or 0.9%) in September, as the entire gain was due to a surge in full-time employment. Employment among people aged 55 and older rose in September and was little changed for the other demographic groups, according to the report by the Statistics Canada. Creation of new job positions is considered of utmost importance for consumer spending.
Meanwhile, the rate of unemployment in the country probably remained steady at 7.1% in September. It has been the highest level of unemployment since June 2014, when a rate of 7.1% was reported.
A higher-than-expected rate of increase in employment and a drop in unemployment rate would have a strong bullish effect on the local currency. Statistics Canada is expected to release the official employment report at 13:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.632% on November 5th, or the highest level since June 29th (0.635%), after which it closed at 0.630% to add 0.007 percentage point compared to November 4th, while marking the seventh consecutive trading day of increase.
The yield on US 2-year government bonds climbed as high as 0.861% on November 5th, or the highest level in at least ten months, after which it closed at 0.834% to add 1.8 basis points (0.018 percentage point) compared to November 4th, while marking a fourth trading day of gains in a row.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.204% on November 5th from 0.193% on November 4th. The November 5th yield spread has been the largest one since September 18th, when the difference was 0.218%.
Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.666% on November 5th, or the highest level since July 15th (1.681%), after which it slid to 1.648% at the close to add 1.4 basis points (0.014 percentage point) compared to November 4th. It has been the sixth gain in the past nine trading days and also a fourth consecutive one.
The yield on US 10-year government bonds climbed as high as 2.263% on November 5th, or the highest level since September 17th (2.298%), after which it slipped to 2.236% at the close to add 0.009 percentage point compared to November 4th, while marking a fourth consecutive trading day of gains.
The spread between 10-year US and 10-year Canadian bond yields narrowed for a third day in a row to reach 0.588% on November 5th from 0.593% on November 4th. The November 5th yield difference has been the lowest one since October 23rd, when the spread was 0.581%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.3172
R2 – 1.3177
R3 (range resistance) – 1.3181
R4 (range breakout) – 1.3196
S1 – 1.3162
S2 – 1.3157
S3 (range support) – 1.3152
S4 (range breakout) – 1.3138
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.3137
R1 – 1.3222
R2 – 1.3366
R3 – 1.3451
S1 – 1.2993
S2 – 1.2908
S3 – 1.2764
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