Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.3294-1.3369. The pair closed at 1.3300, down 0.14% on a daily basis and extending the loss from Tuesday. The daily low was a higher-low test of the low from Tuesday.

At 10:16 GMT today USD/CAD was losing 0.36% for the day to trade at 1.3255. The pair touched a daily low at 1.3247 at 8:55 GMT, overcoming the lower range breakout level (S4) and also testing the weekly S1. The current low for the day has been the lowest level since November 12th, when a low of 1.3221 was recorded. The latter is a possible level of support, while resistance may be encountered at the psychological 1.3300 level.

On Thursday USD/CAD trading may be influenced by the macroeconomic reports 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 November 13th, probably decreased to 271 000, according to market expectations, from 276 000 in the previous week.

The 4-week moving average, an indicator lacking seasonal effects, was 267 750, marking an increase of 5 000 compared to the preceding weeks unrevised average.

The business week, which ended on November 6th has been the 36th consecutive week, when jobless claims stood below the 300 000 threshold, which implied a healthy labor market.

Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or decreased further, this would have a moderate bullish effect on the US dollar.

The number of continuing jobless claims probably dropped to the seasonally adjusted 2 170 000 during the business week ended on November 6th, according to market expectations, from 2 174 000 in the preceding week. The latter represented an increase by 5 000 compared to the revised up number of claims reported in the week ended on October 23rd. 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 13:30 GMT.

Philadelphia Fed Manufacturing Survey

The Philadelphia Fed Manufacturing Index probably improved for a second straight month in October, to reach a level of -1.0, according to the median forecast by experts, from -4.5 index points during September. If so, however, October would be the third consecutive month, when the gauge inhabited negative territory. The index is based on a monthly business survey (the Business Outlook Survey), measuring manufacturing activity in the third district of the Federal Reserve, Philadelphia. Participants give their opinion about the direction of business changes in overall economy and different indicators of activity in their companies, such as employment, working hours, new and existing orders, deliveries, inventories, delivery time, price etc. The survey is conducted every month since May 1968. The results are presented as the difference between the percentages of positive and negative projections. A level above zero is indicative of improving conditions, while a level below zero is indicative of worsening conditions. Higher-than-expected index readings would usually have a moderate bullish effect on the greenback. The Federal Reserve Bank of Philadelphia is expected to release the official results from the survey at 15:00 GMT.

Canada

Wholesale sales

Wholesale sales in Canada probably rose 0.3% in September compared to a month ago. In August compared to July the value of sales made by wholesalers in the country was 0.1% lower. Higher wholesales are indicative of more active retail trade and, respectively, consumption. Therefore, a larger-than-projected surge in wholesale sales would have a limited bullish effect on the loonie. Statistics Canada is to release the official data at 13:30 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.646% on November 18th, or the highest level since November 13th (0.657%), after which it closed at 0.638% to add 1.6 basis points (0.016 percentage point) compared to November 17th. It has been the third consecutive trading day of increase.

The yield on US 2-year government bonds climbed as high as 0.908% on November 18th, or the highest level since November 9th (0.910%), after which it closed at 0.884% to add 2.1 basis points (0.021 percentage point) compared to November 17th. It has been the third consecutive 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 0.246% on November 18th from 0.241% on November 17th. The November 18th yield spread has been the highest one since September 16th, when the difference was 0.280%.

Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.673% on November 18th, after which it slid to 1.650% at the close to lose 0.008 percentage point compared to November 17th. It has been the sixth drop in the past eight trading days.

The yield on US 10-year government bonds climbed as high as 2.299% on November 18th, after which it slipped to 2.275% at the close to remain unchanged compared to November 17th.

The spread between 10-year US and 10-year Canadian bond yields widened to 0.625% on November 18th from 0.617% on November 17th. The November 18th yield difference has been the largest one since November 16th, 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 – 1.3307
R2 – 1.3314
R3 (range resistance) – 1.3321
R4 (range breakout) – 1.3341

S1 – 1.3293
S2 – 1.3285
S3 (range support) – 1.3279
S4 (range breakout) – 1.3259

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

Central Pivot Point – 1.3298
R1 – 1.3376
R2 – 1.3428
R3 – 1.3506

S1 – 1.3246
S2 – 1.3168
S3 – 1.3116