Yesterday’s trade saw USD/CAD within the range of 1.2875-1.2963. The pair closed at 1.2900, going down 0.31% on a daily basis. It has been the 48th drop in the past 95 trading days. The daily high has been the highest level since May 10th, when a high of 1.2979 was registered. The major pair has trimmed its advance to 2.36% so far during the current month, following three consecutive months of decline.
At 6:50 GMT today USD/CAD was edging down 0.37% on the day to trade at 1.2852. The pair touched a daily high at 1.2912 during the early phase of the Asian trading session, undershooting the daily R2 level, and a daily low at 1.2837 at 6:36 GMT.
Canadas dollar rebounded against its US counterpart, as crude oil futures tested highs unseen since early November 2015 on Monday. May 16th marked the 59th gain in crude oil prices out of the past 106 trading days. Oil for June delivery went up as high as $47.98 per barrel on May 16th, or the highest price level since November 4th, and closed at $47.86, soaring 3.57% compared to Friday’s close. As of 6:59 GMT today the commodity was gaining 1.04% to trade at $48.36, after going up as high as $48.42 per barrel earlier.
On Tuesday USD/CAD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United States
Housing Starts, Building Permits
The number of housing starts in the United States probably rose 2.9% to 1.129 million units in April, according to market expectations, from the seasonally adjusted annual rate of 1.089 million during the prior month. The latter has been the lowest number of starts since October 2015, when a revised up level of 1.062 million was reported. In March starts of single-family houses decreased at a monthly rate of 9.2% to 764 000, or the lowest figure since last October, while starts of buildings with five units or more were 8.5% fewer to reach 312 000. The latter has been the lowest figure in at least 1 year. In March, housing starts fell in the Midwest (down 25.4% month-over-month), in the West (down 15.7%) and in the South (down 8.4%). On the other hand, housing starts were more in the Northeast during the period (up 61.3% from a month ago).
Housing starts represent a gauge to measure residential units, on which construction has already begun every month. A start in construction is defined as the foundation laying of a building and it encompasses residential housing primarily.
The number of building permits in the country probably went up 4.3% to 1.130 million in April from an annual level of 1.086 million in March. The latter has been the lowest figure since March 2015, when a revised down level of 1.038 million was reported. Single-family authorizations fell at a monthly rate of 1.2% to reach 727 000 units in March, while permits of units in buildings with five units or more were reported to have slumped 20.6% to 324 000.
Building permits are permits, issued in order to allow excavation. An increase in the number of building permits and housing starts usually occurs a few months after mortgage rates in the country have been reduced. Authorizations are not required in all regions of the United States. Building permits, as an indicator, also provide clues in regard to demand in the US housing market. In case a higher-than-anticipated figure is reported, this would have a moderate bullish effect on the US dollar. The official housing data are due out at 12:30 GMT.
Consumer Price Index
The annualized consumer inflation in the United States probably accelerated to 1.1% in April, according to market expectations, from 0.9% in March. The latter has been the lowest level of consumer inflation since December 2015. In monthly terms, the Consumer Price Index (CPI) probably rose 0.3% in April, following a 0.1% uptick in the preceding month.
In March upward pressure came from cost of services less energy (up 3.0% year-on-year and following a 3.1% surge in February). Within the category, cost of shelter went up 3.2% year-on-year, cost of medical care rose 3.6%. Additionally, consumers paid more for food in March (up at an annualized rate of 0.8%, slowing down from a 0.9% surge in February) and transportation (up 2.8% year-on-year and matching the gain rate in February), according to the report by the Bureau of Labor Statistics. The largest downward pressure on the annual CPI came from prices of energy (down 12.6% in March from a year ago, or a steeper decline compared to February).
The annualized core consumer inflation, which is stripped of prices of food and energy, probably slowed down to 2.1% in April, according to expectations, from 2.2% in March. If so, it would be the lowest core inflation since December 2015.
If the general CPI tends to approach the inflation objective, set by the Federal Reserve and considered as providing price stability, or a level below but close to 2%, this will usually bolster the appeal of the US dollar, as it heightens the probability of monetary policy tightening.
The Bureau of Labor Statistics is to release the official CPI report at 12:30 GMT.
Industrial Production
Industrial output in the United States probably rose at a monthly rate of 0.3% in April, according to market expectations, following a 0.6% contraction in the prior month, or the largest since November 2015.
In March output in the US mining sector decreased 2.9%, or the most since September 2008. Considerable cutbacks in coal mining and in oil and gas well drilling and servicing, as well as lower oil and natural gas extraction contributed to the drag in the sector.
The gauge for utilities registered a 1.2% monthly decrease in March, due to a 4.6% slump in natural gas utilities.
Manufacturing production, which accounts for almost three quarters of total industrial production, shrank 0.3% in March, as production of durables decreased 0.4%, while that of non-durables edged down 0.1%.
In case the index of industrial production rebounded at a faster rate than anticipated in April, this would have a moderate bullish effect on the US dollar. The Board of Governors of the Federal Reserve is to release the production data at 13:15 GMT.
Fed Speakers
At 16:00 GMT the Fed President for San Francisco and also a FOMC member, John Williams, as well as the Fed President for Atlanta, Dennis Lockhart, are expected to take a statement. At 17:15 GMT, the Fed President for Dallas and also a FOMC member, Robert Kaplan, is expected to speak. Their remarks will be closely paid attention to by market players for hints over how the Banks policy tightening cycle will continue in the future.
Canada
Manufacturing Sales
Manufacturing sales in Canada probably dropped for a second consecutive month in March, going down at a monthly rate of 0.8%, according to market expectations. In February compared to January shipments were 3.3% lower, which has been the steepest monthly decrease since August 2014. The Monthly Survey of Manufacturing features statistical data regarding sales of finished goods, inventories, unfilled orders and new orders in Canadas sector of manufacturing. About 10 500 items and 27 000 companies are encompassed.
Manufacturing sales are considered as an indicator of demand in the future. A decrease in the number of goods and unsold inventories suggests, that demand is sufficient and vice versa. At the same time, a drop in sales (shipments) suggests a weaker demand. Therefore, in case shipments decreased at a faster pace than anticipated, this might have a limited-to-moderate bearish effect on the Canadian dollar. Statistics Canada will release the official data at 12:30 GMT.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.2908
R2 – 1.2917
R3 (range resistance) – 1.2924
R4 (range breakout) – 1.2948
S1 – 1.2892
S2 – 1.2884
S3 (range support) – 1.2876
S4 (range breakout) – 1.2852
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.2908
R1 – 1.3048
R2 – 1.3155
R3 – 1.3295
S1 – 1.2801
S2 – 1.2661
S3 – 1.2554
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