Yesterday’s trade saw USD/CAD within the range of 1.3034-1.3168. The pair closed at 1.3060, falling 0.27% on a daily basis. It has been the fifth loss in the past seven trading days. The daily low was a lower-low test of October 23rd low and, at the same time, the lowest level since October 21st, when a low of 1.2965 was reached.
At 10:17 GMT today USD/CAD was up 0.09% for the day to trade at 1.3072. The pair touched a daily high at 1.3086 at 9:26 GMT, testing the daily R2 level.
On Wednesday USD/CAD trading may be influenced by a number of macroeconomic reports and other events as listed below.
Fundamentals
United States
Change in employment by ADP
Employers in the US non-farm private sector probably added 181 000 new jobs during October, according to the median estimate by experts, following 200 000 new positions added in September. If so, this would be the lowest gain in jobs since April 2015, when 169 000 positions were added. The employment report by Automated Data Processing Inc. (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of the governments employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs has a direct link to consumer spending, while the latter is a major driving force behind economic growth. Therefore, in case new jobs growth came above expectations, this would have a moderate-to-strong bullish effect on the US dollar. The official figure is scheduled to be released at 13:15 GMT.
Balance of trade
The deficit on US balance of trade probably narrowed to USD 43.20 billion in September, according to market expectations. In August the trade gap was reported at USD 48.33 billion, which has been the largest one since March 2015, when a deficit of USD 51.37 billion was registered.
Total exports shrank almost 2% to reach USD 185.09 billion in August due to unfavorable exchange rate of the US dollar and weak external demand. Exports of goods dropped 4.1 billion to reach USD 124.5 billion. Within the category, exports of industrial supplies and materials fell USD 2.2 billion, fuel oil exports shrank by USD 0.6 billion, plastic materials exports lowered by USD 0.2 billion and crude oil exports went down USD 0.2 billion during the month.
Total imports, at the same time, expanded 1.2% to USD 233.42 billion in August, driven by higher demand for consumer goods. Imports of goods rose by USD 2.5 billion to reach USD 192.4 billion in August. Within the category, consumer goods imports were up USD 4.0 billion, imports of cell phones and other household goods went up USD 2.1 billion, while those of toys, games and sporting goods increased by USD 0.3 billion during the period.
US exports to Mexico shrank by USD 1.5 billion, while shipments to the European Union declined by USD 0.5 billion. At the same time, purchases from China went up 3%.
In case the trade balance deficit contracted more than projected in September, this would have a strong bullish effect on the US dollar, because of the positive implications for the nations Gross Domestic Product. The official trade data by the Bureau of Economic Analysis is due out at 13:30 GMT.
ISM Non-manufacturing PMI
Activity in United States’ sector of services probably improved in October, with the corresponding non-manufacturing PMI coming in at a reading of 57.1, according to the median forecast by experts, up from 56.9 in September. The latter has been the lowest PMI reading since June, when a level of 56.0 was reported. If expectations were met, October would be the 70th consecutive month, when the gauge stood in the area above 50.0. The PMI is a compound index, based on the values of four equally-weighted components, which comprise it. These sub-indexes reflect seasonally adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and supplier deliveries.
The New Orders Index stood at 56.7 in September, down from a reading of 63.4 in the prior month. The Employment Index advanced to 58.3 in September from 56.0 in August, while marking growth for the 19th month in a row, according to data by the Institute for Supply Management (ISM). The Prices Index slid to 48.4 in September from 50.8 in August, which indicated prices declined in September for the first time since February 2015. The Non-Manufacturing Business Activity Index fell to 60.2 in September from 63.9 in August, indicating growth for a 74th straight month.
Among the 17 services industries, 13 reported growth in September.
In case the PMI showed a larger-than-anticipated improvement in October, this would have a moderate bullish effect on the US dollar. The ISM is to release the official numbers at 15:00 GMT.
Fed Chair Yellens statement
At 15:00 GMT Federal Reserve Chair Janet Yellen is to take a statement. Moderate-to-high volatility of the US dollar crosses is usually present during such events.
Canada
Balance of trade
The deficit on Canadian balance of trade probably shrank to CAD 1.90 billion in September, according to the median estimate by experts, following a deficit figure of CAD 2.53 billion in the preceding month. The latter has been the most considerable trade gap since May 2015, when a deficit of CAD 3.34 billion was registered.
In August total exports shrank 3.6% month-over-month to reach CAD 44.0 billion, mainly attributable to a slump in exports of energy products. Shipments of energy products were 14.7% lower, as exports of crude oil and crude bitumen went down 20.9%. Sales of Canadian consumer goods declined 8%, while exports of pharmaceutical and medicinal products shrank 16.1% during the period.
Canadas total imports grew for a fourth month in a row in August, up 0.2% compared to a month ago to reach CAD 46.5 billion in August. Imports of consumer goods went up 2.6% during the period, supported by higher purchases of pharmaceutical and medicinal products (a 6% increase) and purchases of miscellaneous goods and supplies (up 3%). Imports of electronic and electrical equipment and parts, on the other hand, dropped 7.9% during the month.
In case Canadian trade deficit contracted more than anticipated in September, this would have a moderate-to-strong bullish effect on the loonie. The official trade numbers by Statistics Canada are due out at 13:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.605% on November 3rd, or the highest level since June 29th (0.635%), after which it closed at 0.599% to add 1.8 basis points (0.018 percentage point) compared to November 2nd, while marking the fifth consecutive trading day of increase.
The yield on US 2-year government bonds climbed as high as 0.911% on November 3rd, or the highest level in at least ten months, after which it closed at 0.770% to add 1.3 basis points (0.013 percentage point) compared to November 2nd, while marking a second trading day of gains in a row.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.171% on November 3rd from 0.176% on November 2nd. The November 3rd yield spread has been the lowest one since October 30th, when the difference was 0.152%.
Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.629% on November 3rd, or the highest level since July 15th (1.681%), after which it slid to 1.616% at the close to add 4.2 basis points (0.042 percentage point) compared to November 2nd. It has been the fourth gain in the past seven trading days and also a second consecutive one.
The yield on US 10-year government bonds climbed as high as 2.225% on November 3rd, or the highest level since September 17th (2.298%), after which it slipped to 2.211% at the close to add 3.5 basis points (0.035 percentage point) compared to November 2nd, while marking a second consecutive trading day of gains.
The spread between 10-year US and 10-year Canadian bond yields narrowed to 0.595% on November 3rd from 0.602% on November 2nd. The November 3rd yield difference has been the lowest one since October 23rd, when the spread was 0.581%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.3072
R2 – 1.3085
R3 (range resistance) – 1.3097
R4 (range breakout) – 1.3134
S1 – 1.3048
S2 – 1.3035
S3 (range support) – 1.3023
S4 (range breakout) – 1.2986
By using the traditional method of calculation again, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.3137
R1 – 1.3222
R2 – 1.3366
R3 – 1.3451
S1 – 1.2993
S2 – 1.2908
S3 – 1.2764
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