Yesterday’s trade saw USD/CAD within the range of 1.2914-1.3014. The pair closed at 1.2923, inching down 0.06% compared to Wednesdays close. It has been the 130th drop in the past 284 trading days and also a third consecutive one. The daily low has been the lowest level since June 24th, when a low of 1.2715 was registered. The major pair depreciated 1.02% in June, following a 4.31% surge in the prior month.
At 7:55 GMT today USD/CAD was edging up 0.09% on the day to trade at 1.2934. The pair touched a daily high at 1.2975 during the late phase of the Asian trading session, undershooting the upper range breakout level (R4), and a daily low at 1.2923 during early Asian trade.
Meanwhile, crude oil futures marked their 65th drop out of the past 139 trading days on June 30th. Oil for August delivery went down as low as $48.17 per barrel and closed at $48.33, falling 3.11% compared to Wednesday’s close. As of 8:15 GMT today the commodity was edging up 0.17% to trade at $48.40, after going up as high as $48.67 per barrel earlier.
On Friday USD/CAD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United States
Manufacturing PMI by Markit – final reading
The final estimate of the Manufacturing Purchasing Managers Index for June probably confirmed the preliminary reading of 51.4, according to the median forecast by analysts. It has been the highest PMI reading since March, when a final 51.5 was reported. In May the final seasonally adjusted PMI stood at 50.7, improving from a preliminary reading of 50.5.
According to the preliminary report by Markit, ”Manufacturers indicated a modest rise in production volumes during June, which survey respondents mainly linked to signs of a rebound in customer demand and a corresponding upturn in new work. The latest increase in new business was the strongest since March, although subdued in comparison to the post-crisis average. New orders from abroad expanded at the fastest pace for almost two years, suggesting an additional boost to growth from greater export sales in June.”
”While manufacturers indicated sustained caution in terms of their stock policies, this contrasted with more positive trends for staff recruitment in June. Employment growth picked up further from the near three-year low record in April, in part reflecting a renewed increase in backlogs of work across the manufacturing sector. Volumes of work outstanding rose for the first time since the start of 2016, thereby suggesting greater capacity pressures among manufacturers in June”, Markit stated.
Values above the key level of 50.0 indicate predominant optimism (expanding activity). In case the final PMI for June came in line with expectations or accelerated even further, this would lead to a moderate bullish impact on the US dollar. The final reading is due out at 13:45 GMT.
Manufacturing PMI by the ISM
Activity in United States’ manufacturing sector probably increased at a faster pace in June, with the corresponding manufacturing PMI coming in at a reading of 51.4, according to market expectations, up from 51.3 in May. If so, this would be the fourth consecutive month of expansion, which followed four successive months of contraction.
The New Orders Index came in at 55.7 in May, ticking down from 55.8 in April. The sub-gauge of production was reported at 52.6 in May, slowing down from 54.2 in the preceding month. The index of employment remained at a value of 49.2 for a second straight month in May. The gauge of prices was at 63.5 in May, surging from 59.0 in April, which suggested higher prices of raw materials for a third consecutive month. In May, out of a total of 18 manufacturing industries, 12 reported growth, while 6 reported contraction in overall business activity, according to the report by the Institute for Supply Management (ISM).
Readings above the key level of 50.0 are indicative of expanding activity in the sector of manufacturing. In case the PMI picked up more than anticipated in June, this would have a strong bullish effect on the US Dollar. The Institute for Supply Management (ISM) is to release the official reading at 14:00 GMT.
Feds Mester speech
At 15:00 GMT the Fed President for Cleveland, Loretta Mester, is expected to take a statement. Any remarks made in regard to the US macroeconomic outlook, or the Banks future policy stance, would certainly boost USD volatility, especially amid the overall uncertainty, following the stunning UK vote on EU membership.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.558% on June 30th, or the highest level since June 24th (0.627%), after which it closed at 0.517% to add 3.3 basis points (0.033 percentage point) compared to June 29th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.649% on June 30th, or the highest level since June 24th (0.755%), after which it fell to 0.590% at the close to lose 5.1 basis points (0.051 percentage point) compared to June 29th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.073% on June 30th from 0.091% on June 29th. The June 30th yield spread has been the lowest one so far this year.
Daily, Weekly and Monthly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.2932
R2 – 1.2941
R3 (range resistance) – 1.2951
R4 (range breakout) – 1.2978
S1 – 1.2914
S2 – 1.2905
S3 (range support) – 1.2896
S4 (range breakout) – 1.2868
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 – 1.2950
R1 – 1.2987
R2 – 1.3050
R3 – 1.3087
S1 – 1.2887
S2 – 1.2850
S3 – 1.2787
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