Friday’s trade (in GMT terms) saw USD/CAD within the range of 1.3087-1.3195. The pair closed at 1.3128, edging down 0.14% compared to Thursdays close. It has been the 168th drop in the past 350 trading days. In weekly terms, USD/CAD lost 0.31% of its value during the past week. It has been the 25th drop in the past 39 weeks and also a second consecutive one. The major pair went up 0.18% in September, following a 0.59% gain in August. September has been the third consecutive month of advance.
At 9:08 GMT today USD/CAD was edging down 0.22% on the day to trade at 1.3099. The pair touched a daily high at 1.3139 during early Asian trade, overshooting the daily R1 level, and a daily low at 1.3096 during the mid phase of the European trading session.
Meanwhile, crude oil futures marked their 99th gain out of the past 204 trading days on September 30th. Oil for November delivery went up as high as $48.30 per barrel and closed at $48.24, advancing 0.86% compared to Thursday’s close. As of 9:03 GMT today the commodity was gaining 0.95% to trade at $48.70, after going up as high as $48.87 per barrel earlier. The latter has been a level unseen since August 22nd ($49.08). Crude oil prices and CAD valuation tend to be strongly positively correlated.
On Monday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Manufacturing PMI by Markit – final reading
The final estimate of the Manufacturing Purchasing Managers’ Index for September probably confirmed the preliminary reading of 51.4, according to the median forecast by analysts. In August, the final seasonally adjusted PMI stood at 52.0, inching down from a preliminary 52.1.
According to the preliminary report by Markit, ”Softer rates of output and new business growth were the main factors weighing on the headline PMI during September. Moreover, the latest expansion of manufacturing production was the weakest for three months. Survey respondents suggested that relatively subdued economic conditions had acted as a brake on new order volumes, while there were also reports that the strong dollar had dampened export sales.”
”Backlogs of work increased only marginally in September, with the latest accumulation of unfinished business the slowest since May. Despite a lack of pressure on operating capacity, manufacturers indicated a rebound in job creation from the four-month low seen during August.”
”Purchasing activity picked up again in September, which marked five months of sustained growth. At the same time, stocks of inputs decreased at the slowest pace since February. However, manufacturers remained cautious in terms of their holdings of finished goods during September, with the latest fall the fastest recorded for almost one year”, Markit stated.
Values above the key level of 50.0 indicate predominant optimism (expanding activity). In case the final PMI for August outstripped market expectations, this would lead to a moderate bullish impact on the US dollar. The final reading is due out at 13:45 GMT.
Manufacturing PMI by the ISM
Activity in United States’ manufacturing sector probably expanded in September, with the corresponding manufacturing PMI coming in at a reading of 50.5, according to market expectations. In August, the gauge unexpectedly tumbled to 49.4, or its lowest reading in 7 months. It came after five consecutive months of expansion.
The New Orders Index came in at 49.1 in August, tumbling from 56.9 in July. The sub-gauge of production was reported at 49.6 in August, falling from 55.4 in the preceding month. The index of employment fell further to a value of 48.3 in August from 49.4 in the previous month. The gauge of prices was at 53.0 in August down from 55.0 in July, which suggested higher prices of raw materials for a sixth straight month, but also a slower rate. In August, out of a total of 18 manufacturing industries, 6 reported an expansion, 11 reported a contraction and 1 reported no change in overall business activity, according to the report by the Institute for Supply Management (ISM).
Readings above the key level of 50.0 are indicative of expanding activity in the sector of manufacturing. In case the PMI recovered more than anticipated in September, this would have a strong bullish effect on the US dollar. The Institute for Supply Management (ISM) is to release the official reading at 14:00 GMT.
Canada
RBC Manufacturing PMI
Activity in Canadas manufacturing sector probably increased at a faster rate in September from a month ago. The corresponding Manufacturing Purchasing Managers’ Index probably rose to a reading of 51.5 in September, according to the median forecast by analysts, from 51.1 in the preceding month.
The gauge stood in the zone of expansion for a sixth consecutive month in August. The sub-indexes of production and new orders increased at the slowest pace in six months in August, while the sub-gauge of export orders continued to inhabit the area below 50.0. At the same time, survey respondents signaled a renewed slowdown in job growth.
The PMI report is based on data collected from monthly replies to questionnaires sent to supply managers in over 400 industrial companies. The PMI is a compound index based on five individual indexes: new orders, production, employment, delivery time, stocks of purchases. Values of the index above the key level of 50.0 indicate overall increase in activity in the sector, while readings below 50.0 are indicative of contraction in activity. PMIs are earlier indicators of economic conditions published on a monthly basis and are available much before the publication of relevant data from government authorities. This way they provide an earlier insight about economic development trends.
In case the headline PMI outpaced market expectations in September, this would have a moderate bullish effect on the Canadian dollar. Royal Bank of Canada (RBC) is to release the official report at 13:30 GMT.
Correlation with other Majors
Taking into account the business week ended on September 30th 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 EUR/USD (0.4810, or moderate)
USD/CAD to NZD/USD (0.0516, or very weak)
USD/CAD to USD/CHF (-0.2085, or weak)
USD/CAD to GBP/USD (-0.2291, or weak)
USD/CAD to USD/JPY (-0.5955, or strong)
USD/CAD to AUD/USD (-0.6669, or strong)
1. During the examined period USD/CAD moved strongly in the opposite direction compared to USD/JPY and AUD/USD.
2. USD/CAD moved almost independently compared to NZD/USD during the past week.
3. The correlation between USD/CAD and USD/CHF, USD/CAD and GBP/USD was insignificant.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went up as high as 0.528% on September 30th, or the highest level since September 23rd (0.579%), after which it closed at 0.522% to add 2.8 basis points (0.028 percentage point) compared to September 29th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.766% on September 30th, after which it fell to 0.765% at the close to add 2.7 basis points (0.027 percentage point) compared to September 29th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.243% on September 30th from 0.244% on September 29th. The September 30th yield spread has been the lowest one since September 26th, when the difference was 0.241%.
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 – 1.3138
R2 – 1.3148
R3 (Range Resistance – Sell) – 1.3158
R4 (Long Breakout) – 1.3187
R5 (Breakout Target 1) – 1.3222
R6 (Breakout Target 2) – 1.3236
S1 – 1.3118
S2 – 1.3108
S3 (Range Support – Buy) – 1.3098
S4 (Short Breakout) – 1.3069
S5 (Breakout Target 1) – 1.3034
S6 (Breakout Target 2) – 1.3020
By using the traditional method of calculation, the weekly levels of importance for USD/CAD are presented as follows:
Central Pivot Point – 1.3152
R1 – 1.3257
R2 – 1.3385
R3 – 1.3490
R4 – 1.3594
S1 – 1.3024
S2 – 1.2919
S3 – 1.2791
S4 – 1.2662
In monthly terms, for USD/CAD we have the following pivots:
Central Pivot Point – 1.3077
R1 – 1.3332
R2 – 1.3535
R3 – 1.3790
R4 – 1.4044
S1 – 1.2874
S2 – 1.2619
S3 – 1.2416
S4 – 1.2212
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
