Forex Market: USD/CAD trading outlook for August 17th 2016

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.2799-1.2935. The pair closed at 1.2862, edging down 0.47% compared to Mondays close. It has been the 150th drop in the past 317 trading days and also a seventh consecutive one. The daily low has been a level unseen since June 24th, when a low of 1.2714 was registered. The major pair has increased its slump to 1.27% so far during the current month, following a 0.80% gain in July.

At 7:51 GMT today USD/CAD was inching up 0.06% on the day to trade at 1.2870. The pair touched a daily high at 1.2890 during early European trade, overshooting the daily R2 level, and a daily low at 1.2847 during the early phase of the Asian trading session.

Meanwhile, crude oil futures marked their 79th gain out of the past 172 trading days on August 16th. Oil for September delivery went up as high as $46.73 per barrel, or the highest price level since July 12th, and closed at $46.58, soaring 1.84% compared to Monday’s close. As of 7:46 GMT today the commodity was losing 0.60% to trade at $46.30, after going down as low as $46.11 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.

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

Fundamentals

United States

FOMC Minutes

At 18:00 GMT the Federal Open Market Committee (FOMC) will release the minutes from its meeting on policy held on July 26th-27th. The minutes offer detailed insights on FOMC’s monetary policy stance. This release will be closely examined by market players, as it may provide clues over how the Fed’s policy tightening cycle will develop in the future. High volatility of the currency pairs containing the US dollar is usually present after the publication.

Last month the Federal Open Market Committee left the target range for the federal funds rate intact between 0.25% and 0.50%, as largely expected. Fed policy makers noted that the labor market conditions continued to improve, while short-term growth risks seemed to have diminished, thus, implying that a rate hike this year was still a possibility.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.572% on August 16th, or the highest level since August 3rd (0.578%), after which it closed at 0.567% to add 1.8 basis points (0.018 percentage point) compared to August 15th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.758% on August 16th, or the highest level since July 27th (0.778%), after which it fell to 0.742% at the close to add 1.2 basis points (0.012 percentage point) compared to August 15th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.175% on August 16th from 0.181% on August 15th. The August 16th 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 – 1.2874
R2 – 1.2887
R3 (Range Resistance – Sell) – 1.2900
R4 (Long Breakout) – 1.2937
R5 (Breakout Target 1) – 1.2980
R6 (Breakout Target 2) – 1.3000

S1 – 1.2850
S2 – 1.2837
S3 (Range Support – Buy) – 1.2825
S4 (Short Breakout) – 1.2787
S5 (Breakout Target 1) – 1.2744
S6 (Breakout Target 2) – 1.2725

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