Forex Market: USD/CAD daily trading outlook

Friday’s trade saw USD/CAD within the range of 1.2714-1.3100. The pair closed at 1.3006, surging 1.95% compared to Thursdays close. It has been the 153rd gain in the past 280 trading days and also the steepest one in more than 4 years. The daily high has been the highest level since June 3rd, when a high of 1.3108 was registered. In weekly terms, USD/CAD added 0.86% to its value during the past week. It has been the 8th gain in the past 25 weeks and also a second consecutive one. The major pair has trimmed its loss to 0.57% so far in June, following a 4.31% surge in the prior month.

At 8:22 GMT today USD/CAD was inching up 0.02% on the day to trade at 1.3009. The pair touched a daily high at 1.3087 during the mid phase of the Asian trading session, overshooting the daily R2 level, and a daily low at 1.2999 during early European trade.

Meanwhile, crude oil futures marked their 63rd drop out of the past 135 trading days on June 24th. Oil for August delivery went down as low as $46.70 per barrel, or its lowest price level since June 17th, and closed at $47.64, plunging 4.93% compared to Thursday’s close. As of 8:37 GMT today the commodity was inching down 0.04% to trade at $47.62, after going down as low as $46.92 per barrel earlier.

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

Fundamentals

United States

Services PMI by Markit – preliminary reading

Activity in the US sector of services probably increased at a faster rate in June from a month ago, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 55.5, according to a projection by Trading Economics. In May the services PMI was reported at a final 51.3, improving from a preliminary reading of 51.2. According to Markit, in May new business growth slowed, backlogs of work dropped, while payrolls grew at the lowest rate since January 2015.

The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT and hotels & restaurants. Values above the key level of 50.0 indicate predominant optimism (expansion in general activity). In case a faster than-expected expansion in services sector activity is reported, this would have a moderate bullish effect on the US dollar, as services contribute to a considerable portion of the US GDP. The preliminary reading by Markit Economics is due out at 13:45 GMT.

Correlation with other Majors

Taking into account the business week ended on June 24th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

USD/CAD to USD/CHF (0.9122, or very strong)
USD/CAD to AUD/USD (-0.3956, or moderate)
USD/CAD to NZD/USD (-0.4734, or moderate)
USD/CAD to USD/JPY (-0.8926, or very strong)
USD/CAD to EUR/USD (-0.9225, or very strong)
USD/CAD to GBP/USD (-0.9831, or very strong)

1. During the examined period USD/CAD moved almost equally in one and the same direction with USD/CHF.

2. USD/CAD moved almost equally in the opposite direction compared to USD/JPY, EUR/USD and GBP/USD during the past week. This relationship has been the most pronounced between USD/CAD and GBP/USD, with the correlation between the two pairs being almost perfect.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.627% on June 24th, after which it closed at 0.542% to lose 8.2 basis points (0.082 percentage point) compared to June 23rd.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.755% on June 24th, after which it fell to 0.637% at the close to lose 14.6 basis points (0.146 percentage point) compared to June 23rd.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, shrank to 0.095% on June 24th from 0.159% on June 23rd. The June 24th yield spread has been the lowest one since April 29th, when the difference was 0.090%.

Daily, Weekly and Monthly Pivot Levels

By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:

R1 – 1.3041
R2 – 1.3077
R3 (range resistance) – 1.3112
R4 (range breakout) – 1.3218

S1 – 1.2971
S2 – 1.2935
S3 (range support) – 1.2900
S4 (range breakout) – 1.2794

By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:

Central Pivot Point – 1.2927
R1 – 1.3179
R2 – 1.3353
R3 – 1.3605

S1 – 1.2753
S2 – 1.2501
S3 – 1.2327

In monthly terms, for USD/CAD we have the following pivots:

Central Pivot Point – 1.2914
R1 – 1.3317
R2 – 1.3646
R3 – 1.4102

S1 – 1.2638
S2 – 1.2182
S3 – 1.1906