Forex Market: USD/CAD daily trading forecast

Written by Miroslav Marinov

Miroslav Marinov, a financial news editor at TradingPedia, is engaged with observing and reporting on the tendencies in the Foreign Exchange Market, as currently his focus is set on the major currencies of eight developed nations worldwide.

, | Updated: October 30, 2024

Friday’s trade saw USD/CAD within the range of 1.3263-1.3351. The pair closed at 1.3323, rising 0.23% on a daily basis, while extending the gain from Thursday. The daily high has been a higher-high test of the high from October 1st (1.3334) and also the highest level since September 30th, when a daily high of 1.3433 was registered. In weekly terms, USD/CAD added 0.12% last week, while marking its second consecutive week of advance.

At 9:20 GMT today USD/CAD was losing 0.08% for the day to trade at 1.3310. The pair touched a daily low at 1.3291 at 7:50 GMT, overshooting the range support level (S3).

On Monday USD/CAD trading may be influenced by a number of macroeconomic reports as listed below.

Fundamentals

United States

NY Empire State Manufacturing Index

The New York Empire State Manufacturing Index probably increased for a fourth consecutive month in November to reach a reading of -5.00, according to the median forecast by experts, from -11.36 in the prior month. If so, however, this would be the fourth straight month, when the gauge inhabited negative territory.

The index is based on the monthly Empire State Manufacturing Survey, which is conducted by the Federal Reserve Bank of New York. About 200 top manufacturing executives respond to a questionnaire, sent out during the first day of the month. They provide their estimates in regard to the performance of several business indicators from the prior month, while also forecasting performance during the upcoming six months.

Readings below 0.00 are indicative of worsening business conditions in the region. Higher-than-anticipated index values will usually have a moderate bullish effect on the US dollar. The Federal Reserve Bank of New York is expected to release the official reading at 13:30 GMT.

Canada

Manufacturing sales

Manufacturing sales in Canada probably rebounded in September, going up at a monthly rate of 0.1%, according to market expectations, following a 0.2% drop in August compared to July. The Monthly Survey of Manufacturing features statistical data regarding sales of finished goods, inventories, unfilled orders and new orders in Canadas sector of manufacturing. About 10 500 items and 27 000 companies are encompassed.

Manufacturing sales are considered as an indicator of demand in the future. An increase in the number of goods and unsold inventories suggests that demand is weak and vice versa. At the same time, an increase in sales (shipments) suggests stronger demand. Therefore, in case shipments increased at a faster than projected pace, this might have a limited bullish impact on the Canadian dollar. Statistics Canada will release the official data at 13:30 GMT.

Correlation with other Majors

Taking into account the week ended on November 15th 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 AUD/USD (0.7423, or strong)
USD/CAD to EUR/USD (0.5398, or strong)
USD/CAD to GBP/USD (0.3863, or moderate)
USD/CAD to USD/CHF (0.1373, or weak)
USD/CAD to NZD/USD (-0.0450, or very weak)
USD/CAD to USD/JPY (-0.4966, or moderate)

1. During the examined period USD/CAD moved strongly in one and the same direction with AUD/USD and EUR/USD.

2. USD/CAD moved almost independently compared to NZD/USD during the past week.

3. The correlation between USD/CAD and USD/CHF was insignificant during the period in question.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.657% on November 13th, after which it closed at 0.611% to lose 3.8 basis points (0.038 percentage point) compared to November 12th. It has been the fourth consecutive trading day of decline.

The yield on US 2-year government bonds climbed as high as 0.883% on November 13th, after which it closed at 0.851% to lose 2.4 basis points (0.024 percentage point) compared to November 12th. It has been the second trading day of decline 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, widened for a third consecutive trading day to reach 0.240% on November 13th from 0.226% on November 12th. The November 13th yield spread has been the largest one since September 16th, when the difference was 0.280%.

Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.706% on November 13th, after which it slid to 1.653% at the close to lose 4.5 basis points (0.045 percentage point) compared to November 12th. It has been the fourth consecutive trading day of decline.

The yield on US 10-year government bonds climbed as high as 2.320% on November 13th, after which it slipped to 2.275% at the close to lose 4 basis points (0.04 percentage point) compared to November 12th. It has been the fourth consecutive trading day of decrease.

The spread between 10-year US and 10-year Canadian bond yields expanded to 0.622% on November 13th from 0.617% on November 12th. The November 13th yield difference has been the largest one since November 11th, when the spread was 0.624%.