Forex Market: USD/CAD trading outlook for September 8th 2016

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.2823-1.2914. The pair closed at 1.2884, edging up 0.30% compared to Tuesdays close. It has been the 175th gain in the past 333 trading days. The daily low has been a level unseen since August 19th, when a low of 1.2773 was registered. The major pair has pared its slump to 1.69% so far during the current month, following a 0.59% gain in August.

At 8:44 GMT today USD/CAD was edging down 0.22% on the day to trade at 1.2856. The pair touched a daily high at 1.2897 during early Asian trade, undershooting the daily R2 level, and a daily low at 1.2851 during the early phase of the European trading session.

Meanwhile, crude oil futures marked their 88th gain out of the past 187 trading days on September 7th. Oil for October delivery went up as high as $46.17 per barrel and closed at $45.50, gaining 1.49% compared to Tuesday’s close. As of 8:40 GMT today the commodity was advancing 2.00% to trade at $46.41, after going up as high as $46.49 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.

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

Fundamentals

United States

Initial, Continuing Jobless Claims

The number of people in the United States, who filed for unemployment assistance for the first time during the business week ended on September 2nd, probably rose to 265 000, according to market consensus, from 263 000 in the preceding week.

The 4-week moving average, an indicator lacking seasonal effects, was 263 000, marking a decrease by 1 000 compared to the preceding week’s unrevised average. It has been the lowest level in three weeks.

The business week, which ended on August 26th, has been the 78th consecutive week, when jobless claims stood below the 300 000 threshold, which suggested a healthy labor market. It has been the longest streak since 1970.

Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or increased further, this would have a moderate bearish effect on the US dollar.

The number of continuing jobless claims probably dropped to the seasonally adjusted 2 153 000 during the business week ended on August 26th, according to the median forecast by experts, from 2 159 000 in the preceding week. The latter represented an increase by 14 000 compared to the unrevised number of claims reported in the week ended on August 12th. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago.

The US Department of Labor is to release the weekly report at 12:30 GMT.

Canada

New Housing Price Index

Selling prices of new homes in Canada probably rose for a 16th straight month in July, up 0.2% from a month ago, according to market expectations. In June compared to May prices went up by another 0.1%, marking the slowest monthly increase since January. In June, home values rose the most in St. Catharines–Niagara (up at a monthly 1.2%), in Windsor (up 0.9%) and in the combined region of Toronto and Oshawa (up 0.5%). On the other hand, selling prices were lower in Calgary (down 0.5%), in Edmonton (down 0.4%) and in Saskatoon (down 0.2%) during the same period.

The New Housing Price Index is a key indicator, reflecting the health of the Canadian housing market. Given the current state of the economy, in case prices surged more than anticipated, this would be an indication of a stronger consumer confidence and would, therefore, have a limited-to-moderate bullish effect on the local dollar. Statistics Canada will release the official report at 12:30 GMT.

Building Permits

The overall value of building permits in Canada, issued by municipalities, probably increased 3.0% in July, according to market expectations. The total value of building permits in the country went down 5.5% to reach CAD 6.4 billion in June compared to a month ago, due to lower construction intentions for multi-family homes and institutional buildings. In June, the value of residential permits dropped 5.0% to CAD 4.1 billion, as the multi-family segment posted a 15.8% slump, while permits in the single-family segment rose 4.2%. At the same time, the value of non-residential permits went down 6.2% during the same month to reach CAD 2.3 billion, strongly influenced by a 20.6% drop in construction intentions for institutional buildings and an 8.7% decrease in permits for industrial buildings.

Building permits, as an indicator, provide information regarding demand in Canada’s housing sector. In case the total value of permits rebounded more than expected in July from a month earlier, this would have a limited-to-moderate bullish effect on the Canadian Dollar. The official numbers by Statistics Canada are due out at 12:30 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.577% on September 7th, after which it closed at 0.545% to lose 2.4 basis points (0.024 percentage point) compared to September 6th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.742% on September 7th, after which it fell to 0.738% at the close to add 0.008 percentage point compared to September 6th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.193% on September 7th from 0.161% on September 6th. The September 7th yield spread has been the largest one since September 2nd, when the difference was 0.201%.

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 – 1.2892
R2 – 1.2901
R3 (Range Resistance – Sell) – 1.2909
R4 (Long Breakout) – 1.2934
R5 (Breakout Target 1) – 1.2963
R6 (Breakout Target 2) – 1.2975

S1 – 1.2876
S2 – 1.2867
S3 (Range Support – Buy) – 1.2859
S4 (Short Breakout) – 1.2834
S5 (Breakout Target 1) – 1.2805
S6 (Breakout Target 2) – 1.2793

By using the traditional method of calculation, the weekly levels of importance for USD/CAD are presented as follows:

Central Pivot Point – 1.3040
R1 – 1.3097
R2 – 1.3207
R3 – 1.3264
R4 – 1.3322

S1 – 1.2930
S2 – 1.2873
S3 – 1.2763
S4 – 1.2654

In monthly terms, for USD/CAD we have the following pivots:

Central Pivot Point – 1.3024
R1 – 1.3283
R2 – 1.3462
R3 – 1.3721
R4 – 1.3981

S1 – 1.2845
S2 – 1.2586
S3 – 1.2407
S4 – 1.2229