Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.2902-1.2977. The pair closed at 1.2923, edging down 0.23% compared to Fridays close. It has been the 149th drop in the past 316 trading days and also a sixth consecutive one. The daily low has been a level unseen since July 15th, when a low of 1.2862 was registered. The major pair has increased its slump to 0.81% so far during the current month, following a 0.80% gain in July.
At 7:45 GMT today USD/CAD was edging down 0.31% on the day to trade at 1.2883. The pair touched a daily high at 1.2935 during early Asian trade, undershooting the daily R2 level, and a daily low at 1.2880 during the early phase of the European trading session.
Meanwhile, crude oil futures marked their 78th gain out of the past 171 trading days on August 15th. Oil for September delivery went up as high as $45.93 per barrel, or the highest price level since July 21st, and closed at $45.74, soaring 2.81% compared to Friday’s close. As of 7:50 GMT today the commodity was inching up 0.09% to trade at $45.78, after going up as high as $45.90 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.
On Tuesday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Consumer Price Index
The annualized consumer inflation in the United States probably decelerated to 0.9% in July, according to market expectations, from 1.0% in the preceding two months. If so, this would be the lowest annual inflation since March. In monthly terms, the Consumer Price Index (CPI) probably rose for a fifth consecutive month in July, going up 0.1%, according to the market consensus, following a 0.2% surge in the prior month.
In June, cost of food rose at an annual rate of 0.3%, slowing down from a 0.7% surge in May. It has been the lowest food inflation since March 2010. Cost of transportation services rose at a slower rate, 3% year-on-year in June, following a 3.2% increase in May, while cost of shelter went up 3.5% year-on-year, accelerating from 3.4% in May, and cost of medical care soared at an annual 3.8%, accelerating from 3.5% in May, according to the report by the Bureau of Labor Statistics. On the other hand, cost of energy fell 9.4% in June compared to the same month a year earlier, following a steeper (10.1%) slump in May.
The annualized core consumer inflation, which is stripped of prices of food and energy, probably remained stable at 2.3% in July, according to market expectations. It has been the highest annual core inflation since February.
If the general CPI tends to distance from the inflation objective, set by the Federal Reserve and considered as providing price stability, or a level below but close to 2%, this will usually reduce the appeal of the US dollar, as it lowers the probability of monetary policy tightening.
The Bureau of Labor Statistics is to release the official CPI report at 12:30 GMT.
Housing Starts and Building Permits
The number of housing starts in the United States probably fell 0.8% to 1.180 million units in July, according to market expectations, from the seasonally adjusted annual rate of 1.189 million during the prior month. The latter has been the highest number of starts since February, when a revised up level of 1.194 million was reported. In June, starts of single-family houses increased at a monthly rate of 4.4% to 778 000, while starts of buildings with five units or more rose 1.6% to reach 392 000, or a level unseen since September 2015. In June, housing starts marked the largest increase in the Northeast (46.3%), followed by starts in the West (17.4%). On the other hand, housing starts were lower in the Midwest (-5.2%) and in the South (-3.4%) during the same month.
Meanwhile, the number of building permits in the country probably went up 0.6% to 1.160 million in July from an annual level of 1.153 million in June. If expectations were met, this would be the highest level since February, when the revised up 1.177 million units were reported. Single-family authorizations rose at a monthly rate of 1.0% to reach 738 000 units in June, supported by the Northeast (+13.7%) and the West (+0.6%) regions, while permits of units in buildings with five units or more were reported to have increased 1.9% to 350 000.
In case a higher-than-anticipated figure for either of the two indicators is reported, this would have a moderate bullish effect on the US dollar. The official housing data are due out at 12:30 GMT.
Industrial Production
Industrial output in the United States probably rose for a second straight month in July, going up at a rate of 0.3%, according to market expectations. In June the index of production surged at a monthly rate of 0.6%, or the fastest since July 2015.
In June, output in the US mining sector rose 0.2%, as increases in the index for oil well drilling and servicing and the index for coal mining neutralized declines in the gauge for oil and gas extraction and that for non-metallic mineral mining.
The gauge for utilities registered a 2.4% monthly surge in June, as demand for air conditioning was boosted due to warmer-than-usual weather for that period of the year.
Manufacturing production, which accounts for almost three quarters of total industrial production, expanded 0.4% in June from a month ago, as production of durables increased 0.9%, production of non-durables went down 0.1%, while production in other manufacturing areas (publishing and logging) shrank 1.5%.
A larger-than-projected monthly increase in the index would usually have a moderate bullish effect on the US dollar. The Board of Governors of the Federal Reserve is to release the official production data at 13:15 GMT.
Fed Speakers
At 16:30 GMT the Fed President for Atlanta and also a FOMC member, Dennis Lockhart, is expected to take a statement, followed by the Fed President for St. Louis and a member to the Committee, James Bullard, at 17:00 GMT. Any remarks made in regard to the US macroeconomic outlook or the Bank’s monetary policy stance would bolster USD volatility.
Canada
Manufacturing Shipments
Manufacturing sales in Canada probably rebounded in June, going up at a monthly rate of 0.7%, according to market expectations. In May compared to April shipments were 1.0% lower. The latter has been the largest monthly decline since February, when a revised up 4.0% drop was reported. The Monthly Survey of Manufacturing features statistical data regarding sales of finished goods, inventories, unfilled orders and new orders in Canada’s sector of manufacturing. About 10 500 items and 27 000 companies are encompassed.
Manufacturing sales are considered as an indicator of demand in the future. An increase in the number of goods and unsold inventories suggests, that demand is insufficient and vice versa. At the same time, an increase in sales (shipments) suggests a stronger demand. Therefore, in case shipments rose at a faster pace than anticipated, this might have a limited-to-moderate bullish effect on the Canadian dollar. Statistics Canada will release the official data at 12:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.551% on August 15th, or the highest level since August 4th (0.564%), after which it closed at 0.549% to add 2.3 basis points (0.023 percentage point) compared to August 12th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.730% on August 15th, after which it fell to 0.729% at the close to add 2.3 basis points (0.023 percentage point) compared to August 12th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, remained stable at 0.180% on August 15th compared to that on August 12th. The August 15th 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 – 1.2930
R2 – 1.2937
R3 (Range Resistance – Sell) – 1.2944
R4 (Long Breakout) – 1.2964
R5 (Breakout Target 1) – 1.2988
R6 (Breakout Target 2) – 1.2998
S1 – 1.2916
S2 – 1.2909
S3 (Range Support – Buy) – 1.2902
S4 (Short Breakout) – 1.2882
S5 (Breakout Target 1) – 1.2858
S6 (Breakout Target 2) – 1.2848
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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