Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.2958-1.3081. The pair closed at 1.2994, edging down 0.49% compared to Tuesdays close. It has been the 147th drop in the past 314 trading days and also a fourth consecutive one. The daily low has been the lowest level since July 19th, when a low of 1.2940 was registered. The major pair has neutralized the earlier advance and is now down 0.44% so far during the current month, following a 0.80% gain in July.
At 7:53 GMT today USD/CAD was edging down 0.17% on the day to trade at 1.2972. The pair touched a daily high at 1.2995 during early Asian trade, undershooting the daily R1 level, and a daily low at 1.2964 during the early phase of the European trading session.
Meanwhile, crude oil futures marked their 76th gain out of the past 169 trading days on August 11th. Oil for September delivery went up as high as $43.86 per barrel, or the highest price level since July 25th, and closed at $43.49, soaring 4.27% compared to Wednesday’s close. As of 8:01 GMT today the commodity was edging up 0.30% to trade at $43.62, after going up as high as $44.17 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.
On Friday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Producer Prices
Annual producer prices in the United States probably rose for a second consecutive month in July, edging up 0.2%, according to the median estimate by experts. In June prices went up at an annual rate of 0.3%, while marking the first increase since December 2014. 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 in July, this would have a limited-to-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 1.2% in July from 1.3% in June. The latter has been the fastest annual increase in the core PPI since January 2015, when the index gained 1.6%. The Bureau of Labor Statistics is expected to report on the official PPI performance at 12:30 GMT.
Retail Sales
Retail sales in the United States probably rose for a fourth straight month in July, going up at a monthly rate of 0.4%, according to the median forecast by experts, following a 0.6% surge in June.
Among the 13 major categories, 11 registered growth, 1 registered a decline and 1 showed no change in June. During the period, higher sales were observed at motor vehicle and part dealers (+0.1%), furniture and home furniture stores (+0.5%), building material and garden equipment and supplies dealers (+3.9%), gasoline stations (+1.2%), non-store retailers (+1.1%), miscellaneous store retailers (+0.9%), sporting goods, hobby, book and music stores (+0.8%), health and personal care stores (+0.7%) and food and beverage stores (+0.5%).
On the other hand, in June, sales were lower at clothing and clothing accessories stores (-1.0%), while sales at electronics and appliance stores remained flat, according to the report by the US Census Bureau.
Annualized retail sales increased 2.7% in June, following a 2.5% climb in May.
US core retail sales, or retail sales ex autos, probably rose 0.2% in July compared to a month ago, according to expectations, following another 0.7% gain in June. If so, it would be a fifth consecutive month of increase. This indicator removes large ticket prices and historical seasonality of automobile sales.
In case the general index of sales rose at a slower rate than anticipated in July, this would have a strong bearish effect on the US dollar. The official report by the US Census Bureau is due out at 12:30 GMT.
Reuters/Michigan Consumer Sentiment Index – preliminary reading
The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States improved in August. The preliminary reading of the corresponding index, which usually comes out two weeks ahead of the final data, probably rose to a reading of 91.5 during the current month from a final 90.0 in July. The latter came above the preliminary reading of 89.5, which was reported on July 15th.
The sub-index of current economic conditions increased to a final reading of 109.0 in July from a preliminary value of 108.7. In June this barometer was reported at a final 110.8.
The sub-index of consumer expectations came in at a reading of 77.8, up from a preliminary value of 77.1 in July, but down from a final reading of 82.4 registered in June.
Participants in the July survey expected that the rate of inflation will be at 2.7% during the next year, or down from a rate of 2.8% in the preliminary release, but up from a rate of 2.4% in the June survey.
In case the gauge of consumer sentiment met or even exceeded expectations in August, this would have a moderate-to-strong bullish effect on the US Dollar. The preliminary reading is due out at 14:00 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.541% on August 11th, or the highest level since August 5th (0.543%), after which it closed at 0.538% to add 3 basis points (0.03 percentage point) compared to August 10th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.754% on August 11th, or the highest level since July 27th (0.778%), after which it fell to 0.753% at the close to add 6.3 basis points (0.063 percentage point) compared to August 10th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.215% on August 11th from 0.182% on August 10th. The August 11th yield spread has been the highest one since June 14th, when the difference was 0.229%.
Daily, Weekly and Monthly Pivot Levels
By employing the Camarilla calculation method, the daily levels of importance for USD/CAD are presented as follows:
R1 – 1.3005
R2 – 1.3017
R3 (Range Resistance – Sell) – 1.3028
R4 (Long Breakout) – 1.3062
R5 (Breakout Target 1) – 1.3101
R6 (Breakout Target 2) – 1.3117
S1 – 1.2983
S2 – 1.2971
S3 (Range Support – Buy) – 1.2960
S4 (Short Breakout) – 1.2926
S5 (Breakout Target 1) – 1.2887
S6 (Breakout Target 2) – 1.2871
By using the traditional method of calculation, the weekly levels of importance for USD/CAD are presented as follows:
Central Pivot Point – 1.3123
R1 – 1.3250
R2 – 1.3329
R3 – 1.3456
R4 – 1.3583
S1 – 1.3044
S2 – 1.2917
S3 – 1.2838
S4 – 1.2759
In monthly terms, for USD/CAD we have the following pivots:
Central Pivot Point – 1.3038
R1 – 1.3244
R2 – 1.3460
R3 – 1.3666
R4 – 1.3872
S1 – 1.2822
S2 – 1.2616
S3 – 1.2400
S4 – 1.2184
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