Yesterday’s trade saw USD/CAD within the range of 1.3305-1.3391. The pair closed at 1.3361, ticking down 0.01% on a daily basis, while extending the loss from Monday. The daily low was a lower-low test of the low from November 30th and also the lowest level since November 27th.
According to Binary Tribunes analysis on historical volatility, the average intraday volatility for the pair was 0.658% in November, or the lowest since August 2014, when average volatility was estimated at 0.523%. At the same time, the average daily volatility for USD/CAD was 0.752% in November, or again the lowest since August 2014. Back then the average daily volatility was estimated at 0.493%.
At 10:09 GMT today USD/CAD was gaining 0.11% for the day to trade at 1.3376. The pair touched a daily high at 1.3377 at 10:08 GMT, undershooting the daily R2 level. Resistance may be encountered at November 30th high of 1.3394, while support may be received within the 1.3300-1.3320 area.
On Wednesday USD/CAD trading may be influenced by a number of macroeconomic reports and other events as listed below.
Fundamentals
United States
Change in employment by the ADP
Employers in the US non-farm private sector probably added 190 000 new jobs during November, according to the median estimate by experts, following 182 000 new positions added in October. The latter has been the smallest gain in jobs since April 2015, when 169 000 positions were added. The employment report by Automated Data Processing Inc. (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of the governments employment statistics, this report is used by traders and market analysts as a reliable predictor of the official non-farm payrolls data. Creation of jobs has a direct link to consumer spending, while the latter is a major driving force behind growth in a consumption-based economy. Therefore, in case new jobs growth came above expectations, this would have a moderate-to-strong bullish effect on the US dollar. The official figure is scheduled to be released at 13:15 GMT.
Feds Yellen speech
At 16:00 GMT the Fed Chair Janet Yellen is expected to take a statement. Moderate-to-high volatility of the currency pairs containing the US dollar is usually present during such events.
Feds Beige Book report
At 19:00 GMT the Federal Reserve is to release its ”Beige Book” report, which is published eight times during the year. Each of the banks in the 12 Federal Reserve Districts gathers data in regard to current economic situation in the country on the basis of interviews with key business contacts, economists, market experts, and other sources. In case the Beige Book presents an optimistic economic outlook, this will usually support the greenback, while a pessimistic view will have a bearish effect on the currency.
Canada
Bank of Canada policy decision
Bank of Canada’s (BoC) Governing Council probably left the target for the benchmark interest rate (overnight rate) without change at 0.50% at the policy meeting today, according to expectations. At its meeting on July 15th the central bank cut its benchmark by 0.25% to the current level, citing a lower outlook for growth and higher risks to financial stability. The Bank Rate was reduced to 0.75% from 1.00%, while the Deposit Rate was lowered to 0.25% from 0.50%.
At the October meeting all key rates were left intact, while GDP growth projections for 2015, 2016 and 2017 were revised down.
According to excerpts from the BoC Statement from October 21st: ”Total CPI inflation remains near the bottom of the Bank’s target range, owing to declines in consumer energy prices. Core inflation is close to 2 per cent as the transitory effects of the past depreciation of the Canadian dollar are roughly offsetting disinflationary pressures from economic slack, which has increased this year. The Bank judges that the underlying trend in inflation continues to be about 1.5 to 1.7 per cent.”
”Canada’s economy has rebounded, as projected in July. In non-resource sectors, the looked-for signs of strength are more evident, supported by the stimulative effects of previous monetary policy actions and past depreciation of the Canadian dollar. Household spending continues to underpin economic activity and is expected to grow at a moderate pace over the projection period. However, lower prices for oil and other commodities since the summer have further lowered Canada’s terms of trade and are dampening business investment and exports in the resource sector. This has led to a modest downward revision to the Bank’s growth forecast for 2016 and 2017.”
”The Bank projects real GDP will grow by just over 1 per cent in 2015 before firming to about 2 per cent in 2016 and 2 1/2 per cent in 2017.”
The official policy decision is scheduled to be announced at 15:00 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.640% on December 1st, after which it closed at 0.595% to lose 3.6 basis points (0.036 percentage point) compared to November 30th. It has been the fourth drop in the past seven trading days and also the second consecutive one.
The yield on US 2-year government bonds climbed as high as 0.950% on December 1st, after which it closed at 0.919% to lose 1.5 basis points (0.015 percentage point) compared to November 30th. It has been the second drop in the past twelve trading days.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.324% on December 1st from 0.303% on November 30th. The December 1st yield spread has been the largest one since August 4th, when the difference was 0.331%.
Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.593% on December 1st, or the highest level since November 25th (1.615%), after which it slid to 1.493% at the close to lose 7.8 basis points (0.078 percentage point) compared to November 30th. It has been the fifth drop in the past seven trading days.
The yield on US 10-year government bonds climbed as high as 2.239% on December 1st, after which it slipped to 2.155% at the close to lose 5.3 basis points (0.053 percentage point) compared to November 30th. It has been the seventh consecutive trading day of decrease.
The spread between 10-year US and 10-year Canadian bond yields widened to 0.662% on December 1st from 0.637% on November 30th. The December 1st yield difference has been the largest one since September 18th, when the spread was 0.672%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.3369
R2 – 1.3378
R3 (range resistance) – 1.3385
R4 (range breakout) – 1.3408
S1 – 1.3353
S2 – 1.3345
S3 (range support) – 1.3337
S4 (range breakout) – 1.3314
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.3362
R1 – 1.3447
R2 – 1.3523
R3 – 1.3608
S1 – 1.3286
S2 – 1.3201
S3 – 1.3125
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