Forex Market: USD/CAD trading outlook for September 19th 2016

Friday’s trade (in GMT terms) saw USD/CAD within the range of 1.3142-1.3249. The pair closed at 1.3210, edging up 0.38% compared to Thursdays close. It has been the 180th gain in the past 340 trading days. The daily high has been a level unseen since July 27th, when a high of 1.3254 was registered. In weekly terms, USD/CAD added 1.23% to its value during the past week. It has been the 14th gain in the past 37 weeks, a second consecutive one and also the steepest one since the week ended on May 22nd. The major pair has increased its advance to 0.80% so far during the current month, following a 0.59% gain in August.

At 8:39 GMT today USD/CAD was edging down 0.55% on the day to trade at 1.3138. The pair touched a daily high at 1.3226 during early Asian trade, undershooting the daily R2 level, and a daily low at 1.3136 during the early phase of the European trading session.

Meanwhile, crude oil futures marked their 103rd drop out of the past 194 trading days on September 16th. Oil for November delivery went down as low as $43.35 per barrel, or a level unseen since September 2nd, and closed at $43.62, losing 2.02% compared to Thursday’s close. As of 8:34 GMT today the commodity was advancing 1.56% to trade at $44.30, after going up as high as $44.50 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.

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

Fundamentals

United States

NAHB Housing Market Index

The National Association of Home Builders (NAHB) Housing Market Index probably remained steady at a reading of 60.0 in September, according to market expectations. If so, September would be the 27th consecutive month, when the gauge stood in the area above 50.0. In August, the sub-index of sales expectations rose to a level of 67.0 from 66.0 in the prior month, the gauge of buyer traffic slipped to 44.0 from 45.0 in July, while the gauge of current sales conditions went up to 65.0 from 63.0 in July.

The indicator is based on a monthly survey in regard to current home sales and expected sales in the coming six months. Values above the key level of 50.0 indicate that housing market conditions are good. Therefore, higher-than-projected readings would provide a moderate support to the US dollar. The official report is scheduled for release at 14:00 GMT.

Correlation with other Majors

Taking into account the business week ended on September 16th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

USD/CAD to USD/JPY (0.7856, or strong)
USD/CAD to USD/CHF (0.5979, or strong)
USD/CAD to EUR/USD (-0.3873, or moderate)
USD/CAD to GBP/USD (-0.7564, or strong)
USD/CAD to NZD/USD (-0.8650, or very strong)
USD/CAD to AUD/USD (-0.8885, or very strong)

1. During the examined period USD/CAD moved strongly in the opposite direction compared to GBP/USD, while moving strongly in one and the same direction with USD/CHF and USD/JPY.

2. USD/CAD moved almost equally in the opposite direction compared to NZD/USD and AUD/USD during the past week. This relationship has been the most pronounced between USD/CAD and AUD/USD.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went up as high as 0.586% on September 16th, after which it closed at 0.581% to add 0.006 percentage point compared to September 15th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.778% on September 16th, after which it fell to 0.770% at the close to add 3.6 basis points (0.036 percentage point) compared to September 15th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.189% on September 16th from 0.159% on September 15th. The September 16th yield spread has been the largest one since September 13th, when the difference was 0.200%.

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 – 1.3220
R2 – 1.3230
R3 (Range Resistance – Sell) – 1.3239
R4 (Long Breakout) – 1.3269
R5 (Breakout Target 1) – 1.3303
R6 (Breakout Target 2) – 1.3318

S1 – 1.3200
S2 – 1.3190
S3 (Range Support – Buy) – 1.3181
S4 (Short Breakout) – 1.3151
S5 (Breakout Target 1) – 1.3117
S6 (Breakout Target 2) – 1.3102

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

Central Pivot Point – 1.3163
R1 – 1.3296
R2 – 1.3382
R3 – 1.3515
R4 – 1.3648

S1 – 1.3077
S2 – 1.2944
S3 – 1.2858
S4 – 1.2772

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