Friday’s trade (in GMT terms) saw USD/CAD within the range of 1.2924-1.2995. The pair closed at 1.2953, edging down 0.32% compared to Thursdays close. It has been the 148th drop in the past 315 trading days and also a fifth consecutive one. The daily low has been the lowest level since July 15th, when a low of 1.2862 was registered. In weekly terms, USD/CAD lost 1.66% of its value during the past week. It has been the 21st drop in the past 32 weeks and also the sharpest one since the week ended on April 3rd. The major pair has increased its slump to 0.58% so far during the current month, following a 0.80% gain in July.
At 7:57 GMT today USD/CAD was edging down 0.17% on the day to trade at 1.2931. The pair touched a daily high at 1.2977 during early Asian trade, overshooting the range resistance level (R3), and a daily low at 1.2928 during the early phase of the European trading session.
Meanwhile, crude oil futures marked their 77th gain out of the past 170 trading days on August 12th. Oil for September delivery went up as high as $44.78 per barrel, or the highest price level since July 22nd, and closed at $44.49, soaring 2.30% compared to Thursday’s close. As of 8:02 GMT today the commodity was advancing 1.39% to trade at $45.11, after going up as high as $45.13 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.
On Monday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
NY Empire State Manufacturing Index
The New York Empire State Manufacturing Index probably increased to a reading of 2.00 in August, according to the median forecast by experts, from 0.55 in the prior month. If so, this would be the third straight month, when the gauge inhabited positive territory.
In July, the gauges for new orders (-1.82 down from 10.9 in the preceding month) and shipments (0.7 down from 9.32 in the prior month) dropped, the sub-index for inventories stood into negative territory (-8.8, up from -15.31 in June), while the sub-index for labor market conditions fell below the key 0.00 level, reaching -4.4. Respondents in the survey were less optimistic in regard to the six-month outlook, while their capital spending plans remained without change.
Index readings above 0.00 are indicative of improving business conditions in the region. Higher-than-anticipated index values will usually have a moderate bullish effect on the US dollar. The Federal Reserve Bank of New York is expected to release the official reading at 12:30 GMT.
NAHB Housing Market Index
The National Association of Home Builders (NAHB) Housing Market Index probably advanced to a reading of 60.0 in August, according to market expectations, from 59.0 in July. If so, August would be the 26th consecutive month, when the gauge stood in the area above 50.0. In July, the sub-index of sales expectations dropped to a level of 66.0 from 69.0 in the prior month, the gauge of buyer traffic slipped to 45.0 from 46.0 in June, while the gauge of current sales conditions ticked down to 63.0 from 64.0 in June.
The indicator is based on a monthly survey in regard to current home sales and expected sales in the coming six months. Values above the key level of 50.0 indicate that housing market conditions are good. Therefore, higher-than-projected readings would provide a moderate support to the US dollar. The official report is scheduled for release at 14:00 GMT.
Correlation with other Majors
Taking into account the business week ended on August 12th 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 GBP/USD (0.9393, or very strong)
USD/CAD to USD/CHF (0.8923, or very strong)
USD/CAD to USD/JPY (0.6815, or strong)
USD/CAD to AUD/USD (-0.1593, or weak)
USD/CAD to EUR/USD (-0.7368, or strong)
USD/CAD to NZD/USD (-0.8421, or very strong)
1. During the examined period USD/CAD moved strongly in one and the same direction with USD/JPY, while moving strongly in the opposite direction compared to EUR/USD.
2. USD/CAD moved almost equally in one and the same direction with USD/CHF and GBP/USD during the past week. This relationship has been the most pronounced between USD/CAD and GBP/USD.
3. USD/CAD moved almost equally in the opposite direction compared to NZD/USD during the period in question.
4. The correlation between USD/CAD and AUD/USD was insignificant.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.544% on August 12th, or the highest level since August 4th (0.564%), after which it closed at 0.526% to lose 1.2 basis points (0.012 percentage point) compared to August 11th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.750% on August 12th, after which it fell to 0.706% at the close to lose 4 basis points (0.04 percentage point) compared to August 11th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.180% on August 12th from 0.208% on August 11th. The August 12th yield spread has been the lowest one since August 4th, when the difference was 0.109%.
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 – 1.2960
R2 – 1.2966
R3 (Range Resistance – Sell) – 1.2973
R4 (Long Breakout) – 1.2992
R5 (Breakout Target 1) – 1.3015
R6 (Breakout Target 2) – 1.3024
S1 – 1.2946
S2 – 1.2940
S3 (Range Support – Buy) – 1.2933
S4 (Short Breakout) – 1.2914
S5 (Breakout Target 1) – 1.2891
S6 (Breakout Target 2) – 1.2882
By using the traditional method of calculation, the weekly levels of importance for USD/CAD are presented as follows:
Central Pivot Point – 1.3023
R1 – 1.3121
R2 – 1.3290
R3 – 1.3388
R4 – 1.3487
S1 – 1.2854
S2 – 1.2756
S3 – 1.2587
S4 – 1.2419
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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