Forex Market: USD/CAD trading outlook for Monday (November 21st 2016)

Friday’s trade (in GMT terms) saw USD/CAD within the range of 1.3493-1.3566. The pair closed at 1.3512, inching up 0.04% compared to Thursdays close. It has been the 204th gain in the past 385 trading days and also a second consecutive one. The daily high has been a level not seen since November 14th, when a high of 1.3590 was registered. In weekly terms, USD/CAD lost 0.25% of its value during the past week. It has been the 27th drop in the past 46 weeks. The major pair has extended its advance to 0.77% during the current month, following a 2.14% surge in October.

At 8:47 GMT today USD/CAD was edging down 0.49% on the day to trade at 1.3446. The pair touched a daily high at 1.3516 during early Asian trade, undershooting the daily R1 level, and a daily low at 1.3435 during the early phase of the European trading session.

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

Fundamentals

Canada

Wholesale Sales

Wholesale sales in Canada probably rose 0.4% in September compared to a month ago, according to market expectations. If so, this would be the sixth consecutive month of sales increase. In August, the value of sales made by wholesalers in the country increased 0.8% from a month ago. 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 13:30 GMT.

Correlation with other Majors

Taking into account the business week ended on November 18th 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 GBP/USD (0.0704, or very weak)
USD/CAD to USD/CHF (0.0280, or very weak)
USD/CAD to USD/JPY (0.0169, or very weak)
USD/CAD to NZD/USD (-0.1290, or weak)
USD/CAD to EUR/USD (-0.1478, or weak)
USD/CAD to AUD/USD (-0.1533, or weak)

1. During the examined period USD/CAD moved almost independently compared to GBP/USD, USD/CHF and USD/JPY. The correlation between USD/CAD and USD/JPY was almost non-existent.

2. The correlation between USD/CAD and NZD/USD, USD/CAD and EUR/USD, USD/CAD and AUD/USD was insignificant.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went up as high as 0.703% on November 18th, or the highest level since April 27th (0.703%), after which it closed at 0.671% to lose 0.005 percentage point compared to November 17th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 1.076% on November 18th, or the highest level since December 30th (1.079%), after which it fell to 1.068% at the close to add 2.6 basis points (0.026 percentage point) compared to November 17th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.397% on November 18th from 0.366% on November 17th. The November 18th yield spread has been the largest one since January 27th, when the difference was 0.415%.

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 – 1.3519
R2 – 1.3525
R3 (Range Resistance – Sell) – 1.3532
R4 (Long Breakout) – 1.3552
R5 (Breakout Target 1) – 1.3576
R6 (Breakout Target 2) – 1.3585

S1 – 1.3505
S2 – 1.3499
S3 (Range Support – Buy) – 1.3492
S4 (Short Breakout) – 1.3472
S5 (Breakout Target 1) – 1.3448
S6 (Breakout Target 2) – 1.3439

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

Central Pivot Point – 1.3501
R1 – 1.3601
R2 – 1.3691
R3 – 1.3791
R4 – 1.3892

S1 – 1.3411
S2 – 1.3311
S3 – 1.3221
S4 – 1.3132

In monthly terms, for USD/CAD we have the following pivots:

Central Pivot Point – 1.3283
R1 – 1.3560
R2 – 1.3711
R3 – 1.3988
R4 – 1.4265

S1 – 1.3132
S2 – 1.2855
S3 – 1.2704
S4 – 1.2553