Yesterday’s trade saw USD/CAD within the range of 1.2750-1.2920. The pair closed at 1.2772, tumbling 1.07% on a daily basis. It has been the 34th drop in the past 71 trading days and also a third consecutive one. The daily low has been the lowest level since July 15th 2015, when a low of 1.2719 was registered. USD/CAD has increased its slump to 1.62% so far during the current month, following two consecutive months of decline.
At 6:50 GMT today USD/CAD was edging up 0.21% on the day to trade at 1.2799. The pair touched a daily high at 1.2811 at 6:36 GMT, undershooting the range resistance level (R3), and a daily low at 1.2752 during mid-Asian trade.
Canadas dollar advanced to fresh nine-month highs against its US counterpart, as crude oil futures tested highs unseen since late November 2015 on April 12th. Tuesday marked the 43rd gain in oil prices out of the past 82 trading days and also a third consecutive one. Oil futures for May delivery went up as high as $42.25 per barrel on April 12th, or the highest price level since November 30th, and closed at $41.70, soaring 3.71% on the day. As of 6:58 GMT today the commodity was losing 1.01% to trade at $41.29, after going down as low as $41.27 per barrel earlier.
On Wednesday USD/CAD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United States
Retail Sales
Retail sales in the United States probably rebounded in March, going up at a monthly rate of 0.4%, according to the median forecast by experts. In February retail sales went down 0.1% to mark their second consecutive month of decline.
Among the 13 major categories, 5 registered growth, while 8 showed declines in February. During the period, an increase in sales was reported at building material, garden equipment and supplies dealers (+1.6% month-over-month), sporting goods, hobby, book and music stores supplies dealers (+1.2%), food services and drinking places (+1%), clothing (+0.9%) and health and personal care stores (+0.7%).
On the other hand, in February, retail sales dropped at gasoline stations (-4.4%), miscellaneous store retailers (-1.1%), furniture and home furniture (-0.5%), motor vehicle sales and part dealers (-0.2%), food and beverages (-0.2%), general merchandise stores (-0.2%), non-store retailers (-0.2%) and electronics and appliance stores (-0.1%), according to the report by the US Census Bureau.
Annualized retail sales surged 3.1% in February, following a 3.4% climb in January.
US core retail sales, or retail sales ex autos, probably increased 0.5% in March compared to a month ago, following a 0.1% drop in February. If so, March would be the fastest rate of increase in core sales since July 2015, when a revised up 0.6% surge was reported. This indicator removes large ticket prices and historical seasonality of automobile sales.
In case the general index of sales rose more than anticipated in March, this would have a strong bullish effect on the US dollar, because of positive implications regarding consumer spending and consumer inflation in the country. The official report is due out at 12:30 GMT.
Producer Prices
Annual producer prices in the United States probably rose for the first time in the past 14 months in March, by 0.3%, according to the median estimate by experts. In February producer prices remained flat. The Producer Price Index reflects the change in prices of over 8 000 products, sold by manufacturers during the respective period. The 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 rose at a faster 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 1.1% in March from 1.2% in February. The latter has been the fastest annual surge in the core PPI since January 2015. The Bureau of Labor Statistics is expected to report on the official PPI performance at 12:30 GMT.
Federal Reserves ”Beige Book” report
At 18:00 GMT the Federal Reserve is to release its ”Beige Book” report. It 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 will probably leave the target for the benchmark interest rate (overnight rate) without change at 0.50% at the policy meeting today, according to market expectations. At its meeting on July 15th 2015 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 March meeting all key rates were left intact, while inflation risks were seen as roughly balanced.
According to excerpts from the BoC Statement from March 9th 2016: ”Canada’s GDP growth in the fourth quarter was not as weak as expected, but the near-term outlook for the economy remains broadly the same as in January. National employment has held up despite job losses in resource-intensive regions, and household spending continues to underpin domestic demand. Non-energy exports are gathering momentum, particularly in sectors that are sensitive to exchange rate movements. However, overall business investment remains very weak due to retrenchment in the resource sector.”
”Inflation in Canada is evolving broadly as anticipated. The factors that pushed total CPI inflation up to 2 per cent will likely unwind in the months ahead. Measures of core inflation are at or just below 2 per cent, boosted by the temporary effects of past exchange rate depreciation. Material excess capacity in the Canadian economy will continue to dampen inflation.”
”All things considered, the risks to the profile for inflation are roughly balanced. Meanwhile, financial vulnerabilities continue to edge higher, in part due to regional shifts in activity associated with the structural adjustment underway in Canada’s economy.”
The official policy decision is scheduled to be announced at 14:00 GMT, followed by a press conference with BoC Governor, Stephen Poloz, at 15:15 GMT.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.2788
R2 – 1.2803
R3 (range resistance) – 1.2819
R4 (range breakout) – 1.2866
S1 – 1.2756
S2 – 1.2741
S3 (range support) – 1.2725
S4 (range breakout) – 1.2679
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.3050
R1 – 1.3148
R2 – 1.3316
R3 – 1.3414
S1 – 1.2882
S2 – 1.2784
S3 – 1.2616
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