Yesterday’s trade saw USD/CAD within the range of 1.4183-1.4383. The pair closed at 1.4354, surging 0.64% on a daily basis, while marking its 8th consecutive trading day of gains. The daily high has been the highest level since April 30th 2003, when a high of 1.4425 was registered.
At 9:25 GMT today USD/CAD was gaining 0.26% for the day to trade at 1.4378. The pair touched a daily high at 1.4398 at 9:09 GMT, overshooting the daily R2 level, and a daily low at 1.4339 during the early hours of the Asian trading session. Resistance may be encountered within the 1.4400-1.4415 area and then – at the high from April 30th 2003 (1.4425). Support may be received at the hourly 21-period EMA (1.4335) and then – at the hourly 55-period EMA (1.4282).
The Canadian dollar has recently been heavily influenced by a continuous decline in prices of crude oil. The commodity has fallen in 12 out of the past 20 trading days, while on January 13th it marked its first daily gain since December 31st. Oil futures for February delivery were up 0.77% on the day to trade at $30.71 per barrel as of 9:31 GMT, after advancing to as high as $30.97 earlier. On January 12th the commodity plunged to $29.93 per barrel, or a level unseen since November 2003. Oil has slumped 17.10% so far during the current month.
On Thursday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Import and Export prices
Prices of imported goods in the United States probably fell for a seventh consecutive month in December, going down at a monthly rate of 1.4%, according to market expectations. In November import prices were 0.4% lower from a month ago, driven by a 2.5% decline in fuel import prices and a 0.2% dip in non-fuel prices. In annual terms, prices were 9.4% lower in November, which has been the 16th consecutive month of decline. Generally, lower import prices of goods suggest lower rates of consumer inflation.
Prices of exported goods from the United States probably decreased for a seventh consecutive month in December, falling at a monthly rate of 0.5%. In November export prices were 0.6% lower from a month ago, as agricultural export prices fell 1.1%, while prices of non-agricultural goods dropped 0.3%. In annual terms, export prices slumped 6.3% in November, or for a 15th 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.
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 January 8th, probably increased to 275 000, according to market expectations, from 277 000 reported in the preceding week. If expectations were met, this would be the lowest number of claims since the business week ended on December 18th, when a figure of 267 000 was reported.
The 4-week moving average, an indicator lacking seasonal effects, was 275 750, marking a decrease by 1 250 compared to the preceding weeks unrevised average.
The business week, which ended on January 1st has been the 43rd 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 fell to the seasonally adjusted 2 215 000 during the business week ended on January 1st from 2 230 000 in the preceding week. The latter represented an increase by 25 000 compared to the revised up number of claims reported in the week ended on December 18th. 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.
Canada
New Housing Price Index
Selling prices of new homes in Canada probably rose for an eighth straight month in December, up 0.2%, according to market expectations. In November compared to October prices went up another 0.3%. Home values climbed at a rate of 1.5% in November compared to the same month a year ago, following 1.3% year-on-year increases, reported in the preceding four months. The New Housing Price Index is a key indicator, reflecting the health of the Canadian housing market. In case prices surged more than anticipated, this would be an indication of a strong demand and would, therefore, have a limited bullish effect on the loonie. Statistics Canada will release the official data at 13:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.356% on January 13th, after which it closed at 0.313% to lose 2.5 basis points (0.025 percentage point) compared to January 12th. It has been the 13th drop in the past 20 trading days and also a third consecutive one.
The yield on US 2-year government bonds climbed as high as 0.956% on January 13th, after which it closed at 0.903% to lose 2.5 basis points (0.025 percentage point) compared to January 12th. It has been the 13th drop in the past 21 trading days and also a second consecutive one.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, was unchanged at 0.590% on January 13th from a day ago. The January 13th yield spread has been the largest one in at least 9 months.
Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.313% on January 13th, after which it slid to 1.243% at the close to lose 1.9 basis points (0.019 percentage point) compared to January 12th. It has been the 13th drop in the past 20 trading days and also a second consecutive one.
The yield on US 10-year government bonds climbed as high as 2.151% on January 13th, after which it slipped to 2.079% at the close to lose 2.6 basis points (0.026 percentage point) compared to January 12th. It has been the 14th drop in the past 21 trading days and also a second consecutive one.
The spread between 10-year US and 10-year Canadian bond yields narrowed to 0.836% on January 13th from 0.843% on January 12th. The January 13th yield difference has been the lowest one since January 8th, when the spread was 0.817%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.4372
R2 – 1.4391
R3 (range resistance) – 1.4410
R4 (range breakout) – 1.4464
S1 – 1.4336
S2 – 1.4317
S3 (range support) – 1.4299
S4 (range breakout) – 1.4244
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.4054
R1 – 1.4296
R2 – 1.4422
R3 – 1.4664
S1 – 1.3928
S2 – 1.3686
S3 – 1.3560
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