Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3185-1.3244. The pair closed at 1.3190, edging down 0.10% compared to Mondays close. It has been the 162nd drop in the past 342 trading days and also a second consecutive one. The major pair has trimmed its advance to 0.65% so far during the current month, following a 0.59% gain in August.
At 8:41 GMT today USD/CAD was edging down 0.14% on the day to trade at 1.3171. The pair touched a daily high at 1.3207 during late Asian trade, overshooting the range resistance level (R3), and a daily low at 1.3154 during the early phase of the European trading session.
Meanwhile, crude oil futures marked their 93rd gain out of the past 196 trading days on September 20th. Oil for November delivery went up as high as $44.59 per barrel and closed at $44.05, edging up 0.43% compared to Monday’s close. As of 8:32 GMT today the commodity was advancing 2.18% to trade at $45.01, after going up as high as $45.14 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 reports and other events as listed below.
Fundamentals
United States
FOMC policy decision
The Federal Open Market Committee (FOMC) will probably keep the target range for the federal funds rate intact between 0.25% and 0.50% at its two-day policy meeting, scheduled to be concluded today, according to the median forecast by experts.
In July the target range was left intact for the fifth time. Policy makers noted that the labor market conditions improved, while near-term growth risks diminished, thus, suggesting a hike this year was still a possibility.
According to the FOMC’s Policy Statement released in July: ”Information received since the Federal Open Market Committee met in June indicates that the labor market strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months. Household spending has been growing strongly but business fixed investment has been soft. Inflation has continued to run below the Committees 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports.”
The Minutes from the FOMC’s meeting on July 26th-27th revealed that officials decided to leave policy options open, while maintaining the flexibility of adjusting interest rates in accordance with incoming macroeconomic data.
”Members generally agreed that, before taking another step in removing monetary accommodation, it was prudent to accumulate more data in order to gauge the underlying momentum in the labor market and economic activity. A couple of members preferred also to wait for more evidence that inflation would rise to 2 percent on a sustained basis. Some other members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation. One member preferred to raise the target range for the federal funds rate at the current meeting, citing the easing of financial conditions since the U.K. referendum, the return to trend economic growth, solid job growth, and inflation moving toward 2 percent”, the Minutes stated.
”… members emphasized that the actual path of the federal funds rate would depend on the economic outlook as informed by incoming data. In that regard, members judged it appropriate to continue to leave their policy options open and maintain the flexibility to adjust the stance of policy based on incoming information and its implications for the Committees assessment of the outlook for economic activity, the labor market, and inflation, as well as the risks to the outlook.”
The FOMC will announce its official decision on policy at 18:00 GMT, which will be followed by a press conference with Fed Chair, Janet Yellen, at 18:30 GMT. Yellen’s remarks will be closely examined for hints regarding the Bank’s future policy stance.
Canada
Wholesale Sales
Wholesale sales in Canada probably rose 0.2% in July compared to a month ago, according to market expectations. If so, this would be the fourth consecutive month of sales increase. In June compared to May the value of sales made by wholesalers in the country increased 0.7%. Higher wholesale sales are indicative of a more active retail trade and, respectively, consumption. Therefore, a larger-than-projected increase in wholesale sales would have a limited-to-moderate bullish effect on the Canadian Dollar. Statistics Canada is to release the official report at 12:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went up as high as 0.584% on September 20th, after which it closed at 0.570% to lose 1.4 basis points (0.014 percentage point) compared to September 19th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.783% on September 20th, or the highest level since September 14th (0.802%), after which it fell to 0.774% at the close to lose 0.004 percentage point compared to September 19th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.204% on September 20th from 0.194% on September 19th. The September 20th yield spread has been the largest one since September 8th, when the difference was 0.205%.
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 – 1.3195
R2 – 1.3201
R3 (Range Resistance – Sell) – 1.3206
R4 (Long Breakout) – 1.3222
R5 (Breakout Target 1) – 1.3241
R6 (Breakout Target 2) – 1.3249
S1 – 1.3185
S2 – 1.3179
S3 (Range Support – Buy) – 1.3174
S4 (Short Breakout) – 1.3158
S5 (Breakout Target 1) – 1.3139
S6 (Breakout Target 2) – 1.3131
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
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