Forex Market: USD/CAD trading outlook for October 25th 2016

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3285-1.3399. The pair closed at 1.3287, edging down 0.38% compared to Fridays close. It has been the 176th drop in the past 366 trading days. The daily high has been a level not seen since March 16th, when a high of 1.3407 was registered. The major pair has trimmed its advance to 1.21% so far during the current month, following a 0.18% gain in September.

At 8:15 GMT today USD/CAD was edging up 0.38% on the day to trade at 1.3337. The pair touched a daily high at 1.3364 during early Asian trade and a daily low at 1.3278 during the early phase of the Asian trading session as well.

On Tuesday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.

Fundamentals

United States

S&P Case-Shiller Home Price Index

At 13:00 GMT Standard & Poor’s/Case-Schiller will report on the performance of their House Price Index, which measures the change in values of single-family homes in 20 metropolitan areas across the United States. The report serves as a gauge of the US housing market’s health. According to the median estimate by experts, home prices in the 20 areas probably rose 5.0% in August compared to August 2015, while matching the rate in July. It has been the lowest annual increase since August 2015. In July, home values in Portland recorded the highest annual increase (up 12.4%), followed by Seattle (up 11.2%) and Denver (up 9.4%). Within a recovering economy, a higher-than-projected gain in prices will usually have a limited-to-moderate bullish effect on the local currency.

Consumer Confidence Index by the CB

Confidence among consumers in the United States probably eased in October, with the corresponding index coming in at a reading of 101.0, according to market expectations. In September the gauge was reported at 104.1, while confounding the median estimate pointing to a slowdown to 99.0. It has been the highest level of confidence since August 2007, when the gauge came in at 105.6.

This indicator measures the level of individuals’ confidence in the US economic development. It is considered as a leading indicator, as it gives an early insight into consumer spending, which accounts for a major part of the nation’s GDP.

In case the index slowed down more than anticipated, this would have a strong bearish effect on the US dollar, as lower confidence, in general, suggests a lesser willingness to spend and, respectively, a slower economic growth. The Conference Board research group is to release the official report at 14:00 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went up as high as 0.565% on October 24th, after which it closed at 0.564% to add 4.2 basis points (0.042 percentage point) compared to October 21st.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.848% on October 24th, or the highest level since October 14th (0.863%), after which it fell to 0.840% at the close to add 1.2 basis points (0.012 percentage point) compared to October 21st.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.276% on October 24th from 0.306% on October 21st. The October 24th yield spread has been the lowest one since October 20th, when the difference was 0.271%.

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 – 1.3297
R2 – 1.3308
R3 (Range Resistance – Sell) – 1.3318
R4 (Long Breakout) – 1.3350
R5 (Breakout Target 1) – 1.3386
R6 (Breakout Target 2) – 1.3401

S1 – 1.3277
S2 – 1.3266
S3 (Range Support – Buy) – 1.3256
S4 (Short Breakout) – 1.3224
S5 (Breakout Target 1) – 1.3188
S6 (Breakout Target 2) – 1.3173

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

Central Pivot Point – 1.3233
R1 – 1.3461
R2 – 1.3583
R3 – 1.3811
R4 – 1.4038

S1 – 1.3111
S2 – 1.2883
S3 – 1.2761
S4 – 1.2638

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