Forex Market: USD/CAD trading outlook for September 13th 2016

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3034-1.3125. The pair closed at 1.3040, inching down 0.08% compared to Fridays close. It has been the 159th drop in the past 336 trading days. The daily high has been a level unseen since September 1st, when a high of 1.3149 was registered. The major pair has increased its slump to 0.50% so far during the current month, following a 0.59% gain in August.

At 8:34 GMT today USD/CAD was edging up 0.39% on the day to trade at 1.3091. The pair touched a daily high at 1.3109 during early European trade, undershooting the upper breakout target 1 (R5), and a daily low at 1.3030 during the early phase of the Asian trading session.

Meanwhile, crude oil futures marked their 90th gain out of the past 190 trading days on September 12th. Oil for October delivery went down as low as $44.72 per barrel, or a level unseen since September 5th, and closed at $46.29, gaining 0.89% compared to Friday’s close. As of 8:29 GMT today the commodity was retreating 2.12% to trade at $45.31, after going down as low as $45.22 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 report listed below.

Fundamentals

United States

Monthly Budget Statement

The United States probably recorded a government budget deficit of USD 108 billion in August, according to market expectations, after a budget gap of USD 113 billion during the previous month. The latter has been a 24% decrease compared to the figure reported in July 2015.

In July total receipts fell 7% to USD 210 billion. Individual income taxes contributed to USD 100 billion, social security and other payroll taxes – USD 82 billion, corporate income taxes – USD 9 billion and other taxes and duties – USD 19 billion.

Total outlays shrank 14% to USD 323 billion during July. Social security contributed to USD 77 billion, Medicare – USD 50 billion, defense – USD 47 billion, interest on debt – USD 28 billion and other outlays – USD 121 billion, according to the report by the US Treasury.

The current fiscal year-to-date budget gap amounted to USD 514 billion through July, or a 10% increase compared to the same period a year earlier.

A smaller-than-projected budget deficit in August would have a moderate bullish effect on the US dollar. The Financial Management Service is to publish the official figure at 18:00 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.594% on September 12th, after which it closed at 0.586% to add 0.003 percentage point compared to September 9th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.806% on September 12th, or the highest level since September 6th (0.806%), after which it fell to 0.766% at the close to lose 1.6 basis points (0.016 percentage point) compared to September 9th.

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 September 12th from 0.199% on September 9th. The September 12th yield spread has been the lowest one since September 6th, when the difference was 0.161%.

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 – 1.3048
R2 – 1.3057
R3 (Range Resistance – Sell) – 1.3065
R4 (Long Breakout) – 1.3090
R5 (Breakout Target 1) – 1.3119
R6 (Breakout Target 2) – 1.3131

S1 – 1.3032
S2 – 1.3023
S3 (Range Support – Buy) – 1.3015
S4 (Short Breakout) – 1.2990
S5 (Breakout Target 1) – 1.2961
S6 (Breakout Target 2) – 1.2949

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

Central Pivot Point – 1.2976
R1 – 1.3128
R2 – 1.3207
R3 – 1.3359
R4 – 1.3512

S1 – 1.2897
S2 – 1.2745
S3 – 1.2666
S4 – 1.2588

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