Forex Market: USD/CAD daily trading forecast

Yesterday’s trade saw USD/CAD within the range of 1.3240-1.3311. The pair closed at 1.3285, slipping 0.09% on a daily basis. It has been the first drop in the past four trading days. The daily high was a lower-high test of the high from Friday, while the latter has been the highest level since October 1st.

At 9:49 GMT today USD/CAD was losing 0.08% for the day to trade at 1.3277. The pair touched a daily low at 1.3262 at 6:45 GMT, overshooting the range support level (S3). USD/CAD has been trading above the weekly central pivot level for a second straight day in a row.

A strong support zone has formed between the 1.3250 and 1.3265 levels. A break and close below it may send the pair down for a test of November 6th low at 1.3153. On the other hand, a breakout from the upper boundary of the range around 1.3305 may clear the way for a test of October 1st high at 1.3334.

On Tuesday USD/CAD trading may be influenced by the macroeconomic reports listed below.

Fundamentals

United States

Export and import prices

Prices of imported goods in the United States probably fell for a fifth consecutive month in October, dipping at a monthly rate of 0.1%, according to market expectations. In September import prices were 0.1% lower from a month ago, driven by lower non-fuel prices. In annual terms, prices were 10.7% lower in September, which has been the 14th consecutive month of decline. Generally, lower import prices of goods suggest lower rates of consumer inflation and a lesser probability of a rate hike.

Prices of exported goods from the United States probably decreased for a fifth consecutive month in October, going down at a monthly rate of 0.1%. In September export prices were 0.7% lower from a month ago, as agricultural prices went down 1.1%, while prices of non-agricultural goods fell 0.6%. In annual terms, export prices slumped 7.4% in September, or for a 13th month in a row. Lower prices of exported goods generally bolster demand abroad, and as US trade accounts for 20% of international trade relations, this also tends to be dollar positive.

The Department of Labor is expected to release the official numbers at 13:30 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.690% on November 9th, or the highest level since June 23rd (0.721%), after which it closed at 0.672% to lose 0.004 percentage point compared to November 6th. It has been the first drop in the past nine trading days.

The yield on US 2-year government bonds climbed as high as 0.910% on November 9th, after which it closed at 0.890% to remain unchanged compared to November 6th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened for a fourth consecutive trading day to reach 0.218% on November 9th from 0.214% on November 6th. The November 9th 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 1.759% on November 9th, or the highest level since July 2nd (1.791%), after which it slid to 1.719% at the close to add 0.005 percentage point compared to November 6th. It has been the eighth gain in the past 11 trading days and also a sixth consecutive one.

The yield on US 10-year government bonds climbed as high as 2.377% on November 9th, or the highest level since July 21st (2.403%), after which it slipped to 2.345% at the close to add 2 basis points (0.02 percentage point) compared to November 6th, while marking a sixth consecutive trading day of gains.

The spread between 10-year US and 10-year Canadian bond yields expanded to 0.626% on November 9th from 0.611% on November 6th. The November 9th yield difference has been the largest one since September 29th, when the spread was 0.626%.

Daily and Weekly Pivot Levels

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

R1 – 1.3292
R2 – 1.3298
R3 (range resistance) – 1.3305
R4 (range breakout) – 1.3324

S1 – 1.3278
S2 – 1.3272
S3 (range support) – 1.3264
S4 (range breakout) – 1.3246

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

Central Pivot Point – 1.3219
R1 – 1.3405
R2 – 1.3502
R3 – 1.3688

S1 – 1.3122
S2 – 1.2936
S3 – 1.2839