Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.2679-1.2845. The pair closed at 1.2776, shedding 0.53% compared to Wednesdays close. It has been the 127th drop in the past 279 trading days. The daily low has been the lowest level since June 10th, when a low of 1.2656 was registered. USD/CAD has trimmed its loss to 0.61% so far in June, following a 4.31% surge in the prior month.

At 8:20 GMT today USD/CAD was gaining 1.94% on the day to trade at 1.3024. The pair touched a daily high at 1.3100 during the mid phase of the Asian trading session, or its highest level since June 3rd, and a daily low at 1.2714 during early Asian trade.

Meanwhile, crude oil futures marked their 72nd gain out of the past 134 trading days on June 23rd. Oil for August delivery went up as high as $50.44 per barrel and closed at $49.80, rising 1.36% compared to Wednesday’s close. As of 8:33 GMT today the commodity was 3.35% in the red to trade at $48.13, after going down as low as $46.75 per barrel earlier, or its lowest price level since June 17th.

On Friday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.

Fundamentals

United States

Durable Goods Orders

The value of durable goods orders in the United States probably decreased 0.5% in May from a month ago, according to the median forecast by experts, following an unrevised 3.4% surge in April, or the largest one since January.

The value of shipments of manufactured durable goods, up for the first time in three months, rose 0.6% (or USD 1.5 billion) in April to reach USD 232.5 billion. The value of unfilled orders for manufactured durable goods, up in three out of the past four months, went up 0.6% (or USD 6.3 billion) in April to reach USD 1,137.0 billion. At the same time, the value of inventories of manufactured durable goods, down in nine out of the past ten months, shrank 0.2% (or USD 0.7 billion) during the period to USD 384.4 billion, according to data by the US Census Bureau.

Non-defense new orders for capital goods increased 7.8% (or USD 5.4 billion) in April to USD 73.6 billion, while defense new orders for capital goods expanded 3.7% (or USD 0.5 billion) during the month to USD 13.2 billion.

The value of durable goods orders, excluding transportation, probably rose 0.2% in May from a month ago, according to expectations, following a revised up 0.5% surge in April. The latter has been the largest monthly increase since January, when core orders were up at a revised down 1.2%.

In case the general index fell at a faster-than-projected pace, this would have a strong bearish effect on the US dollar, due to negative implications in regard to the wider gauge of production, factory orders. The US Census Bureau is scheduled to release the official report at 12:30 GMT.

Reuters/Michigan Consumer Sentiment Index – final reading

The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States was lower in June from a month ago. The final reading of the corresponding index, which usually comes out two weeks after the preliminary data, probably came in at 94.0, down from a preliminary value of 94.3. In May the index stood at a final reading of 94.7, down from a preliminary value of 95.8. The survey encompasses about 500 respondents throughout the country. The index is comprised by two major components, a gauge of current conditions and a gauge of expectations. The current conditions index is based on the answers to two standard questions, while the index of expectations is based on three standard questions. All five questions have an equal weight in determining the value of the overall index.

According to preliminary data, the sub-index of current economic conditions, which measures US consumers’ views of their personal finances, went up to 111.7 in June, or the highest level in nearly 11 years, from a final reading of 109.9 in May. The sub-index of consumer expectations decelerated to a flash reading of 83.2 in June from a final value of 84.9 in May.

Respondents in the June survey expect that the rate of inflation during the next year will probably be at 2.4%, or matching the rate expected in the May survey.

In case the final value of the June consumer sentiment index outpaced the median forecast by analysts, this would have a moderate bullish effect on the US dollar. The final reading is due out at 14:00 GMT.

US Dollar largely supported as the UK votes to leave the EU

Demand for the US Dollar and other haven assets rose sharply, following the shocking outcome from the UK vote on EU membership. According to Reuters, 51.9% of the British voters (17 410 742 people) supported Brexit, while 48.1% (16 141 241 respondents) voted in favor of remaining within the Euro bloc. At the same time, British Prime Minister, David Cameron, announced its intention to resign by October, following the vote. Speaking outside Downing Street, Cameron said he would try to “steady the ship” in the near future.

Meanwhile, the UKIP leader, Nigel Farage, said the referendum outcome was a victory for “real people”.

The Pound registered its sharpest rate of decline within a day on record, as it was losing more than 10% at one point during Fridays Asian trading session, with GBP/USD falling to as low as 1.3231, or a level unseen since September 1985. “Its back to the future, were back to where we were in 1985,” said Nick Parsons, co-head of global currency strategy at NAB, cited by Reuters. “Weve had a 10 percent decline in six hours. Thats simply extraordinary, and a vote to leave provides an existential crisis for Europe”, he noted.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.635% on June 23rd, or the highest level since May 31st (0.663%), after which it closed at 0.624% to add 2.9 basis points (0.029 percentage point) compared to June 22nd.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.799% on June 23rd, or the highest level since June 7th (0.807%), after which it fell to 0.749% at the close to add (0.002 percentage point) compared to June 22nd.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, fell to 0.125% on June 23rd from 0.152% on June 22nd. The June 23rd yield spread has been the lowest one since May 3rd, when the difference was 0.111%.