Yesterday’s trade saw USD/CAD within the range of 1.3242-1.3315. The pair closed at 1.3296, ticking down 0.03% on a daily basis, while marking its third consecutive trading day of losses. The daily low has been the lowest level since November 12th, when a low of 1.3221 was registered.
At 10:35 GMT today USD/CAD was gaining 0.06% for the day to trade at 1.3291. The pair touched a daily high at 1.3334 at 8:35 GMT, undershooting the upper range breakout level (R4). It has been the highest level since November 18th, when a high of 1.3370 was reached. Resistance may be encountered within the area between 1.3350-1.3365, where the pairs advance has been halted on several occasions in the past few trading days. Support, on the other hand, may be provided in the area close to the lower Bollinger band (viewed on a 4-hour time frame), or 1.3250-1.3260.
On Friday USD/CAD trading may be influenced by the macroeconomic reports listed below.
Fundamentals
Canada
Retail sales
Retail sales in Canada probably increased 0.2% in September on a monthly basis, according to the median forecast by experts. If so, it would be the fifth consecutive month of increases. In August sales went up 0.5%, which also matched the rate in July. Retail sales, excluding sales of automobiles, probably shrank 0.2% in September compared to the preceding month, following two months of flat performance. If expectations were met, September would mark the first decline in core sales since April, when a 0.6% slump was reported. Large-ticket purchases are excluded due to their high volatility, which could influence the general trend. In case core retail sales fell more than anticipated, this would have a moderate bearish effect on the Canadian dollar. Statistics Canada is to release the official report at 13:30 GMT.
Consumer inflation
The annualized consumer inflation in Canada probably remained at 1.0% for a second straight month in October, according to market expectations. In August annual consumer prices were reported to have risen 1.3%, while matching the rate in July.
In September prices rose in seven out of eight major categories. Prices of food rose 3.5% year-on-year, while cost of recreation, education and reading went up 2.5%. Consumers also paid more for clothing and footwear in September (a 1.2% year-on-year increase). On the other hand, downward pressure on the Consumer Price Index came from cost of transportation, as the latter decreased 3.5% during the period, according to the report by the Statistics Canada.
Bank of Canadas (BoC) annualized Core CPI, which excludes prices of fruits, vegetables, gasoline, fuel oil, natural gas, mortgages, intercity transportation, and tobacco products, probably increased 2.0% in October, slowing down from a 2.1% surge in the prior month. If expectations were met, this would be the lowest annual core inflation since July 2014, when a rate of 1.7% was reported. This is the key measure of inflation, on which the central bank bases its decisions regarding monetary policy. In case both the general CPI and the core CPI decelerated more than projected in October, this would have a strong bearish impact on the Canadian dollar. The official CPI report by the Statistics Canada is due out at 13:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.642% on November 19th, after which it closed at 0.619% to lose 1.9 basis points (0.019 percentage point) compared to November 18th. It has been the first drop in the past four trading days.
The yield on US 2-year government bonds climbed as high as 0.904% on November 19th, after which it closed at the exact same level to add 2.4 basis points (0.024 percentage point) compared to November 18th. It has been the fourth 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 0.285% on November 19th from 0.242% on November 18th. The November 19th yield spread has been the highest one since September 15th, when the difference was 0.310%.
Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.651% on November 19th, after which it slid to 1.623% at the close to lose 2.7 basis points (0.027 percentage point) compared to November 18th. It has been the seventh drop in the past nine trading days and also a second consecutive one.
The yield on US 10-year government bonds climbed as high as 2.276% on November 19th, after which it slipped to 2.255% at the close to lose 1.8 basis points (0.018 percentage point) compared to November 18th. It has been the sixth drop in the past nine trading days.
The spread between 10-year US and 10-year Canadian bond yields widened to 0.632% on November 19th from 0.623% on November 18th. The November 19th yield difference has been the largest one since September 28th, when the spread was 0.653%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.3303
R2 – 1.3310
R3 (range resistance) – 1.3316
R4 (range breakout) – 1.3336
S1 – 1.3289
S2 – 1.3282
S3 (range support) – 1.3276
S4 (range breakout) – 1.3256
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
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