Forex Market: USD/CAD daily trading outlook

Friday’s trade saw USD/CAD within the range of 1.3619-1.3759. The pair closed at 1.3756, soaring 0.97% on a daily basis, while extending the gain from Thursday. It has been the sharpest daily rate of increase since December 7th, when the pair surged 1.00%. The daily high has been the highest level since June 18th 2004, when a high of 1.3773 was registered. In weekly terms, USD/CAD went up 2.95% last week, or the most since the week ended on January 25th, when it appreciated 3.63%. USD/CAD has risen 2.69% so far during the current month.

At 10:08 GMT today USD/CAD was losing 0.19% for the day to trade at 1.3729. The pair touched a daily low at 1.3701 at 8:20 GMT, overshooting the range support level (S3).

The Canadian dollar has recently been pressured by a continuous decline in oil prices. Crude oil futures for January delivery were down a seventh consecutive trading day to trade at $35.35 per barrel as of 10:14 GMT on Monday. The commodity earlier touched a daily low of $35.19 a barrel, which was a higher-low test of the low from Friday ($35.16). The latter has been the lowest price level since February 19th 2009, when oil futures slipped as low as $34.59 per barrel. Crude oil has lost 15.14% of its value so far in December, following a 10.60% slump in the prior month.

No relevant macroeconomic reports and other events, which may have an impact on USD/CAD trading, are scheduled for release on Monday.

Correlation with other Majors

Taking into account the week ended on December 13th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

USD/CAD to GBP/USD (0.6880, or strong)
USD/CAD to EUR/USD (0.6243, or strong)
USD/CAD to NZD/USD (0.5410, or strong)
USD/CAD to AUD/USD (-0.6346, or strong)
USD/CAD to USD/CHF (-0.7639, or strong)
USD/CAD to USD/JPY (-0.8060, or very strong)

1. During the examined period USD/CAD moved strongly in one and the same direction with NZD/USD, EUR/USD and GBP/USD. This relationship has been the most pronounced between USD/CAD and GBP/USD.

2. USD/CAD moved strongly in the opposite direction compared to AUD/USD and USD/CHF during the past week.

3. USD/CAD moved almost equally in the opposite direction compared to USD/JPY during the period in question.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.548% on December 11th, after which it closed at 0.482% to lose 6.2 basis points (0.062 percentage point) compared to December 10th. It has been the 9th drop in the past 15 trading days.

The yield on US 2-year government bonds climbed as high as 0.959% on December 11th, or the highest level since December 7th (0.967%), after which it closed at 0.879% to lose 6.8 basis points (0.068 percentage point) compared to December 10th. It has been the 6th drop in the past 20 trading days.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.397% on December 11th from 0.403% on December 10th. The December 11th yield spread has been the lowest one since December 9th, when the difference was 0.380%.

Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.485% on December 11th, after which it slid to 1.407% at the close to lose 8 basis points (0.08 percentage point) compared to December 10th. It has been the 11th drop in the past 15 trading days and also a sixth consecutive one.

The yield on US 10-year government bonds climbed as high as 2.239% on December 11th, or matching the high from the preceding trading day, after which it slipped to 2.132% at the close to lose 10.2 basis points (0.102 percentage point) compared to December 10th. It has been the 14th drop in the past 20 trading days.

The spread between 10-year US and 10-year Canadian bond yields narrowed to 0.725% on December 11th from 0.747% on December 10th. The December 11th yield difference has been the lowest one since December 9th, when the spread was 0.720%.

Daily and Weekly Pivot Levels

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

R1 – 1.3769
R2 – 1.3782
R3 (range resistance) – 1.3795
R4 (range breakout) – 1.3833

S1 – 1.3743
S2 – 1.3730
S3 (range support) – 1.3718
S4 (range breakout) – 1.3679

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

Central Pivot Point – 1.3626
R1 – 1.3889
R2 – 1.4023
R3 – 1.4286

S1 – 1.3492
S2 – 1.3229
S3 – 1.3095