Forex Market: USD/CAD trading outlook for September 14th 2016

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3030-1.3190. The pair closed at 1.3177, soaring 1.05% compared to Mondays close. It has been the 178th gain in the past 337 trading days and also the steepest one since August 5th. The daily high has been a level unseen since August 9th, when a high of 1.3191 was registered. The major pair has neutralized earlier losses and is now up 0.55% so far during the current month, following a 0.59% gain in August.

At 8:35 GMT today USD/CAD was edging down 0.20% on the day to trade at 1.3151. The pair touched a daily high at 1.3182 during early Asian trade, undershooting the daily R1 level, and a daily low at 1.3128 during the late phase of the Asian trading session.

Meanwhile, crude oil futures marked their 101st drop out of the past 191 trading days on September 13th. Oil for October delivery went down as low as $44.77 per barrel and closed at $44.90, tumbling 3.00% compared to Monday’s close. As of 8:30 GMT today the commodity was gaining 0.80% to trade at $45.26, after going up as high as $45.33 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 listed below.

Fundamentals

United States

Import and Export prices

Prices of imported goods in the United States probably fell 0.1% in August, according to market expectations, following five consecutive months of increases. In July import prices were 0.1% higher from a month ago, as prices of non-fuel items went up 0.3%, or the most since March 2014, while fuel import prices dropped 2.5%. In annual terms, import prices were 3.7% lower in July, which has been the 24th consecutive month of decline. Generally, lower import prices of goods suggest lower rates of consumer inflation.

Prices of exported goods from the United States probably increased for a fifth straight month in August, going up at a monthly pace of 0.1%, according to market expectations. In July export prices rose 0.2% from a month ago, as non-agricultural export prices increased 0.3%, supported by higher prices of industrial supplies and materials and consumer goods. On the other hand, agricultural export prices dropped 0.4% in July, dragged down by lower prices of corn and wheat. In annual terms, export prices slumped 3% in July, or for a 23rd month in a row. Lower prices of exported goods generally bolster demand abroad, and as US trade accounts for 20% of international trade relations, this also tends to be dollar positive.

The Department of Labor is expected to release the official numbers at 12:30 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.610% on September 13th, or the highest level since August 29th (0.610%), after which it closed at 0.602% to add 1.6 basis points (0.016 percentage point) compared to September 12th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.814% on September 13th, or the highest level since September 1st (0.821%), after which it fell to 0.798% at the close to add 2.4 basis points (0.024 percentage point) compared to September 12th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.196% on September 13th from 0.188% on September 12th. The September 13th yield spread has been the largest one since September 9th, when the difference was 0.199%.

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 – 1.3192
R2 – 1.3206
R3 (Range Resistance – Sell) – 1.3221
R4 (Long Breakout) – 1.3265
R5 (Breakout Target 1) – 1.3316
R6 (Breakout Target 2) – 1.3339

S1 – 1.3162
S2 – 1.3148
S3 (Range Support – Buy) – 1.3133
S4 (Short Breakout) – 1.3089
S5 (Breakout Target 1) – 1.3038
S6 (Breakout Target 2) – 1.3015

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