Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.2873-1.2967. The pair closed at 1.2946, rising 0.58% compared to Fridays close. It has been the 169th gain in the past 321 trading days and also a second consecutive one. The daily high has been a level unseen since August 15th, when a high of 1.2977 was registered. The major pair has pared its slump to 0.63% so far during the current month, following a 0.80% gain in July.
At 8:21 GMT today USD/CAD was edging down 0.39% on the day to trade at 1.2896. The pair touched a daily high at 1.2951 during early Asian trade, undershooting the daily R1 level, and a daily low at 1.2884 during the early phase of the European trading session.
Meanwhile, crude oil futures marked their 94th drop out of the past 176 trading days on August 22nd. Oil for October delivery went down as low as $47.33 per barrel and closed at $47.41, plummeting 3.46% compared to Friday’s close. As of 8:14 GMT today the commodity was losing 0.82% to trade at $47.02, after going down as low as $46.62 per barrel earlier. The latter has been the lowest price level for this commodity since August 17th. Crude oil prices and CAD valuation tend to be strongly positively correlated.
On Tuesday USD/CAD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Manufacturing PMI by Markit – preliminary reading
Manufacturing activity in the United States probably increased at a slower rate in August, with the corresponding preliminary Purchasing Managers’ Index coming in at a reading of 52.7, according to market expectations. In July the final seasonally adjusted PMI stood at 52.9, while confirming the preliminary reading reported on July 22nd. The latter has been the highest PMI level since October 2015 (54.1), mostly supported by higher rates of growth in production, new orders and employment.
According to Markit’s statement: ”Higher levels of output have been recorded in each of the past two months, with the latest expansion the fastest since November 2015. Anecdotal evidence cited greater inflows of new work and supportive economic conditions.”
”New business growth continued to recover from May’s post-crisis low, with the latest improvement in new order books the strongest for nine months. At the same time, export sales increased at a modest pace in July, which manufacturers linked to successful promotional initiatives and entry into new markets.”
”Payroll numbers increased in July, which continued the upward trend recorded over the past three years. Moreover, the rate of job creation picked up to its strongest since July 2015. Manufacturers noted that faster new business growth and the launch of new products were key factors boosting staff recruitment at their plants.”
Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a worse-than-anticipated performance, this would have a moderate bearish effect on the US dollar. The preliminary PMI reading by Markit Economics is due out at 13:45 GMT.
New Home Sales
Sales of new single-family homes probably decreased 2.0% to the seasonally adjusted annual rate of 580 000 in July, according to market expectations, from 592 000 reported in June. The latter has been the highest level since February 2008. Sales in the West rose 10.9% to 152 000 in June, while sales in the Midwest area went up 10.4% to reach 85 000. On the other hand, new home sales in the South area went down 0.3% to 321 000 during the same period, while those in the Northeast region were 5.6% lower to reach 34 000.
The median sales price of new houses sold went up as high as USD 306 700 in June, after being at USD 288 000 in the preceding month. The average sales price rose to USD 358 200 in June from a revised down USD 351 400 in May. At the end of the month, the seasonally adjusted estimate of new houses for sale was 244 000, up 1.2% from a month ago. It represents a supply of 4.9 months at the current sales rate, according to the report by the US Census Bureau.
In case the index decreased more than anticipated, this would have a strong bearish effect on the US Dollar. The Census Bureau is to report the official figure at 14:00 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.591% on August 22nd, or the highest level since August 17th (0.603%), after which it closed at 0.552% to lose 2.3 basis points (0.023 percentage point) compared to August 19th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.783% on August 22nd, or the highest level since June 23rd (0.787%), after which it fell to 0.746% at the close to lose 0.004 percentage point compared to August 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 0.194% on August 22nd from 0.175% on August 19th. The August 22nd yield spread has been the largest one since August 11th, when the difference was 0.208%.
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 – 1.2955
R2 – 1.2963
R3 (Range Resistance – Sell) – 1.2972
R4 (Long Breakout) – 1.2998
R5 (Breakout Target 1) – 1.3028
R6 (Breakout Target 2) – 1.3041
S1 – 1.2937
S2 – 1.2929
S3 (Range Support – Buy) – 1.2920
S4 (Short Breakout) – 1.2894
S5 (Breakout Target 1) – 1.2864
S6 (Breakout Target 2) – 1.2851
By using the traditional method of calculation, the weekly levels of importance for USD/CAD are presented as follows:
Central Pivot Point – 1.2871
R1 – 1.2977
R2 – 1.3084
R3 – 1.3190
R4 – 1.3297
S1 – 1.2764
S2 – 1.2658
S3 – 1.2551
S4 – 1.2445
In monthly terms, for USD/CAD we have the following pivots:
Central Pivot Point – 1.3038
R1 – 1.3244
R2 – 1.3460
R3 – 1.3666
R4 – 1.3872
S1 – 1.2822
S2 – 1.2616
S3 – 1.2400
S4 – 1.2184
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