Yesterday’s trade saw USD/CAD within the range of 1.4331-1.4399. The pair closed at 1.4344, inching up 0.02% on a daily basis, while marking its 9th 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 9:13 GMT today USD/CAD was gaining 0.97% for the day to trade at 1.4506. The pair touched a daily high at 1.4527 at 6:30 GMT, overcoming the upper range breakout level (R4), and a daily low at 1.4344 during the early hours of the Asian trading session. The daily high has been the highest level since April 29th 2003, when a high of 1.4549 was reached. Resistance may be encountered in the area around the current daily high (1.4527), then – in the area around the high from April 29th 2003 and finally – at the high from April 25th 2003 (1.4598). Support, on the other hand, may be expected at the hourly 21-period EMA (1.4404) and then – in the area around the current daily low/the hourly 55-period EMA (1.4344/1.4348).
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 being set to mark its 13th daily drop and also the sharpest one since January 11th. Oil futures for February delivery were losing 4.47% on the day to trade at $29.80 per barrel as of 9:27 GMT, after plunging to as low as $29.61 earlier, or a level unseen since mid-November 2003. Oil has slumped 19.48% so far during the current month.
On Friday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Retail sales
Retail sales in the United States probably remained unchanged in December on a monthly basis, according to the median forecast by experts. In November sales were up 0.2%, after a 0.1% increases in the previous two months.
Among the 13 major categories, 8 registered growth, 4 showed declines and 1 showed no change. In November, the largest increases in sales were reported for clothing stores (+0.8%), sporting goods, hobby, book & music stores (+0.8%), food and beverages stores (+0.7%), general merchandise stores (+0.7%), miscellaneous store retailers (+0.7%), food and services drinking places (+0.7%), electronic appliance stores (+0.6%) and nonstore retailers (+0.6%).
On the other hand, in November, retail sales dropped at furniture stores (-0.3%), building material and garden equipment and supplies dealers (-0.3%), motor vehicle & parts dealers (-0.4%), and gasoline stations (-0.8%).
Sales at health and personal care stores remained unchanged during the same month, according to the report by the US Census Bureau.
Annualized retail sales surged 1.4% in November, following a 1.7% climb in October. Novembers rate of increase has been the slowest one since April 2015, when retail sales rose 1.3% year-on-year.
US core retail sales, or retail sales ex autos, probably went up 0.2% in December compared to a month ago, following a 0.4% climb in November. The latter has been the sharpest monthly rate of increase since July 2015, when core sales surged 0.4% as well. This indicator removes large ticket prices and historical seasonality of automobile sales.
In case the general index of sales showed a better-than-projected performance in December, this would have a strong bullish effect on the US dollar. The official report is due out at 13:30 GMT.
Producer Price Index
Annual producer prices in the United States probably fell for an 11th month in a row in December, by 1.0%, according to the median estimate by experts. If so, this would be the smallest annual drop since August 2015, when prices fell 0.8%. In November the annualized Producer Price Index (PPI) dropped 1.1%. It reflects the change in prices of over 8 000 products, sold by manufacturers during the respective period. The Producer Price Index (PPI) differs from the Consumer Price Index (CPI), which measures the change in prices from consumer’s perspective, due to subsidies, taxes and distribution costs of different types of manufacturers in the country. In case producers are forced to pay more for goods and services, they are more likely to pass these higher costs to the end consumer. Therefore, the PPI is considered as a leading indicator of consumer inflation. In case annual producer prices fell at a lesser rate than anticipated, this would have a moderate bullish effect on the US dollar.
The nation’s annualized core producer price inflation, which excludes prices of volatile categories such as food and energy, probably decelerated to 0.3% in December from 0.5% in the prior month. The latter has been the fastest annual surge in the core PPI since September 2015. The Bureau of Labor Statistics is expected to report on the official PPI performance at 13:30 GMT.
Industrial Production Index
Industrial output in the United States probably shrank for a fifth straight month in December, going down at a monthly rate of 0.2%, according to market expectations. In November industrial production contracted 0.6% from a month ago, or at the steepest monthly rate since March 2015.
In November activity in the US mining sector shrank 1.1% compared to a month ago, with a greater part of this decline being attributable to considerable decreases for coal mining and for oil and gas well drilling and servicing. The gauge for utilities registered a 4.3% monthly drop in November, as unusually warm weather conditions weighed on demand for heating.
Manufacturing production, which accounts for almost three quarters of total industrial production, remained flat in November. Production of non-durable goods expanded 0.5%, while production of durable goods shrank 0.2% during the month. At the same time, the gauge for other manufacturing industries (publishing and logging) declined 1.7%.
A larger-than-projected monthly decline in the index would usually have a moderate bearish effect on the US dollar. The Board of Governors of the Federal Reserve is to release the production data at 14:15 GMT.
Reuters/Michigan Consumer Sentiment Index – preliminary reading
The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States improved for a fourth successive month in January. The preliminary reading of the corresponding index, which usually comes out two weeks ahead of the final data, probably rose to 93.0 during the current month from a final reading of 92.6 in December. The latter came above the preliminary reading of 91.8, which was reported on December 11th. If expectations were met, Januarys reading would be the highest since July 2015, when a level of 93.1 was reported.
The sub-index of current economic conditions advanced to a final reading of 108.1 from a preliminary 107.0 in December, after a month ago it stood at 104.3.
The sub-index of consumer expectations came in at a reading of 82.7, up from a preliminary value of 82.0 in December, but lower compared to a final reading of 82.9, registered in November.
Participants in the December survey expected that the rate of inflation will be at 2.6% during the next year, or unchanged compared to the preliminary release, but down from a rate of 2.7% as expected in November.
In case the gauge of consumer sentiment increased at a steeper pace than projected in January, this would have a moderate-to-strong bullish effect on the greenback. The preliminary reading is due out at 15:00 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.329% on January 14th, after which it closed at 0.316% to add 0.003 percentage point compared to January 13th. It has been the 8th gain in the past 21 trading days.
The yield on US 2-year government bonds climbed as high as 0.931% on January 14th, after which it closed at 0.903% to lose 1.2 basis points (0.012 percentage point) compared to January 13th. It has been the 14th drop in the past 22 trading days and also a third consecutive one.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, shrank to 0.587% on January 14th from 0.602% on January 13th. The January 14th yield spread has been the lowest one since January 11th, when the difference was 0.546%.
Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.251% on January 14th, after which it slid to 1.232% at the close to lose 0.009 percentage point compared to January 13th. It has been the 14th drop in the past 21 trading days and also a third consecutive one.
The yield on US 10-year government bonds climbed as high as 2.122% on January 14th, after which it slipped to 2.100% at the close to add 0.009 percentage point compared to January 13th. It has been the 8th gain in the past 22 trading days.
The spread between 10-year US and 10-year Canadian bond yields widened to 0.868% on January 14th from 0.850% on January 13th. The January 14th yield difference has been the largest one since December 31st, when the spread was 0.876%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.4350
R2 – 1.4356
R3 (range resistance) – 1.4363
R4 (range breakout) – 1.4381
S1 – 1.4338
S2 – 1.4332
S3 (range support) – 1.4325
S4 (range breakout) – 1.4307
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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