Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.2764-1.2861. The pair closed at 1.2782, edging down 0.48% compared to Wednesdays close. It has been the 152nd drop in the past 319 trading days and also a ninth 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 1.89% so far during the current month, following a 0.80% gain in July.
At 7:53 GMT today USD/CAD was edging up 0.45% on the day to trade at 1.2839. The pair touched a daily high at 1.2846 during early European trade, overshooting the upper range breakout level (R4), and a daily low at 1.2773 during the early phase of the Asian trading session.
Meanwhile, crude oil futures marked their 81st gain out of the past 174 trading days on August 18th. Oil for September delivery went up as high as $48.38 per barrel, or the highest price level since July 5th, and closed at $48.22, soaring 3.06% compared to Wednesday’s close. As of 7:55 GMT today the commodity was shedding 0.09% to trade at $48.19, after going down as low as $48.15 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
Canada
Retail Sales
Retail sales in Canada probably rose 0.5% in June on a monthly basis, according to the median forecast by experts, following a 0.2% gain in the prior month. If expectations were met, June would be the third consecutive month of sales growth. In May, higher sales were observed at food and beverage stores (up 2.1% month-over-month) and gasoline stations (up 2.3%, as gasoline prices surged). On the other hand, lower sales were registered at all store types in the motor vehicle and parts dealers sub-sector (down 2.0% month-over-month, dragged down by lower sales at new car dealers).
Retail sales, excluding sales of automobiles, probably rose 0.3% in June compared to May, following a 0.9% surge in the prior month. If so, June would be a third straight month of increase. Large-ticket purchases are excluded due to their high volatility, which could influence the general trend. In case general retail sales increased at a faster rate than anticipated in June, this would have a moderate bullish effect on the Canadian dollar. Statistics Canada is to release the official report at 12:30 GMT.
Consumer Price Inflation
The annualized consumer inflation in Canada probably slowed down to 1.3% in July, according to market expectations, from 1.5% in June. If expectations were met, this would be the lowest annual inflation since March, when the general index of consumer prices rose 1.3% year-on-year.
In June, prices of food rose 1.3% year-on-year, following a 1.8% increase in the previous month. Consumers also paid more for shelter during the month (a 1.6% year-on-year increase, following a 1.4% rise in May) and transportation (a 1.1% gain, or matching the rate of growth in May). On the other hand, cost of fuel oil dropped 13.2% in June, slowing down from a 17.3% slump in May. Cost of natural gas fell more in the 12 months to June 2016 than in the 12 months to May, according to the report by the Statistics Canada.
Bank of Canada’s (BoC) annualized core inflation, which excludes prices of fruits, vegetables, gasoline, fuel oil, natural gas, mortgages, intercity transportation, and tobacco products, probably remained steady at 2.1% for a third consecutive month in July, according to market expectations. In April core inflation was registered at 2.2%. This is the key measure of inflation, on which the central bank bases its decisions regarding monetary policy. In case both the general CPI and the core CPI met expectations or slowed down even further in July, this would have a strong bearish impact on the Canadian dollar. The official CPI report by the Statistics Canada is due out at 12:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.586% on August 18th, after which it closed at 0.573% to add 0.001 percentage point compared to August 17th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.734% on August 18th, after which it fell to 0.714% at the close to lose 1.6 basis points (0.016 percentage point) compared to August 17th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.141% on August 18th from 0.158% on August 17th. The August 18th 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 – 1.2791
R2 – 1.2800
R3 (Range Resistance – Sell) – 1.2809
R4 (Long Breakout) – 1.2835
R5 (Breakout Target 1) – 1.2867
R6 (Breakout Target 2) – 1.2879
S1 – 1.2773
S2 – 1.2764
S3 (Range Support – Buy) – 1.2755
S4 (Short Breakout) – 1.2729
S5 (Breakout Target 1) – 1.2697
S6 (Breakout Target 2) – 1.2685
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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