Friday’s trade saw USD/CAD within the range of 1.3266-1.3357. The pair closed at 1.3343, going up 0.46% on a daily basis, while marking its first gain in the past four trading days and also the steepest one since November 6th, when it appreciated 1.06%. In weekly terms, USD/CAD added 0.15% last week, while marking its third consecutive week of advance.
At 10:43 GMT today USD/CAD was gaining 0.48% for the day to trade at 1.3415. The pair touched a daily high at 1.3416 at 10:42 GMT, overcoming the upper range breakout level (R4) and the weekly R1 level. It has been the highest level since September 30th, when a daily high of 1.3433 was reached. The latter may serve as a possible level of resistance for the pair in a short term.
On Monday USD/CAD trading may be influenced by the macroeconomic reports listed below.
Fundamentals
United States
Manufacturing PMI by Markit – preliminary reading
Manufacturing activity in the United States probably slowed down in November, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 52.9, according to market expectations. If so, this would be the lowest reading since October 2013, when the PMI was reported at 51.8. In October the final seasonally adjusted PMI stood at 54.1, improving from a preliminary 54.0.
According to Markits statement: ”New export sales continued to rise at only a modest pace in October, with survey respondents noting that the strong U.S. dollar remained a headwind to growth. Nonetheless, the latest rise in new work from abroad was the third in the past four months, and the fastest since September 2014.”
”Despite rising levels of incoming new work and an upturn in job creation, manufacturers remained relatively cautious in terms of their inventories of finished goods. Reflecting this, post-production stocks were lowered for the third month running and at the fastest pace since June 2014. At the same time, manufacturers sought to boost their stocks of purchases during October, with some citing expectations of rising workloads in the months ahead. Although only modest, the latest increase in pre-production inventories was the sharpest for almost a year.”
”Manufacturers continued to benefit from falling commodity prices in October, with survey respondents widely commenting on reduced costs for steel and other metals. Measured overall, the latest fall in average cost burdens was the fastest since March. Meanwhile, manufacturers indicated that their factory gate charges rose only fractionally, with the rate of inflation the second-slowest for over three years.”
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 14:45 GMT.
Existing home sales
The index of existing home sales in the United States probably fell 1.98% to a level of 5.44 million in October compared to September, according to the median estimate by experts. In September sales were 4.7% higher from a month ago to reach 5.55 million, or the highest level since May 2010, when a figure of 5.66 million was reported. September sales were boosted by a 5.3% surge in sales of single-family houses. At the same time, sales of condos remained flat during the period. The median sale price climbed 6.1% in September compared to the same month a year ago.
In case the index dropped at a steeper monthly rate than anticipated, this would have a limited bearish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 15:00 GMT.
Correlation with other Majors
Taking into account the week ended on November 22nd 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 (0.1082, or weak)
USD/CAD to NZD/USD (0.0066, or very weak)
USD/CAD to USD/CHF (0.0041, or very weak)
USD/CAD to USD/JPY (-0.1031, or weak)
USD/CAD to EUR/USD (-0.6598, or strong)
USD/CAD to GBP/USD (-0.9606, or very strong)
1. During the examined period USD/CAD moved strongly in the opposite direction compared to EUR/USD.
2. USD/CAD moved almost independently compared to NZD/USD and USD/CHF during the past week.
3. USD/CAD moved almost equally in the opposite direction compared to GBP/USD.
4. The correlation between USD/CAD and AUD/USD, USD/CAD and USD/JPY was insignificant during the period in question.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.630% on November 20th, after which it closed at 0.617% to lose 0.002 percentage point compared to November 19th. It has been the second consecutive trading day of decline.
The yield on US 2-year government bonds climbed as high as 0.921% on November 20th, or the highest level since November 6th (0.958%), after which it closed at the exact same level to add 2.9 basis points (0.029 percentage point) compared to November 19th. It has been the fifth consecutive trading day of gains.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, expanded to 0.304% on November 20th from 0.273% on November 19th. The November 20th yield spread has been the highest one since September 15th, when the difference was 0.310%.
Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.634% on November 20th, after which it slid to 1.625% at the close to add 0.002 percentage point compared to November 19th. It has been the third gain in the past ten trading days.
The yield on US 10-year government bonds climbed as high as 2.266% on November 20th, after which it slipped to 2.264% at the close to add 1.7 basis points (0.017 percentage point) compared to November 19th. It has been the fourth gain in the past ten trading days.
The spread between 10-year US and 10-year Canadian bond yields widened to 0.639% on November 20th from 0.624% on November 19th. The November 20th yield difference has been the largest one since September 28th, when the spread was 0.653%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.3351
R2 – 1.3360
R3 (range resistance) – 1.3368
R4 (range breakout) – 1.3393
S1 – 1.3335
S2 – 1.3326
S3 (range support) – 1.3318
S4 (range breakout) – 1.3293
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.3319
R1 – 1.3396
R2 – 1.3449
R3 – 1.3526
S1 – 1.3266
S2 – 1.3189
S3 – 1.3136
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