Forex Market: USD/CAD daily trading outlook

Yesterday’s trade saw USD/CAD within the range of 1.3308-1.3408. The pair closed at 1.3350, ticking down 0.05% on a daily basis, while marking its third consecutive trading day of losses. The daily high has been the highest level since November 23rd, when a high of 1.3437 was registered.

At 10:18 GMT today USD/CAD was losing 0.10% for the day to trade at 1.3329. The pair touched a daily low at 1.3294 at 4:45 GMT, overshooting the lower range breakout level (S4). Support may be received within the 1.3280-1.3300 area, where the pair found support in the last week of November. On the other hand, USD/CAD may encounter resistance in the area around the current daily high (1.3353).

On Thursday USD/CAD trading may be influenced by a number of macroeconomic reports and other events as listed below.

Fundamentals

United States

Initial, Continuing Jobless Claims

The number of people in the United States, who filed for unemployment assistance for the first time during the business week ended on November 27th, probably increased to 267 000, according to market expectations, from 260 000 in the previous week. The latter has been the lowest number of claims since the business week ended on October 23rd, when 260 000 applications for unemployment benefits were reported.

The 4-week moving average, an indicator lacking seasonal effects, was 271 000, remaining unchanged compared to the preceding weeks revised up average.

The business week, which ended on November 20th has been the 38th consecutive week, when jobless claims stood below the 300 000 threshold, which implied a healthy labor market.

Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or increased further, this would have a moderate bearish effect on the US dollar.

The number of continuing jobless claims probably dropped to the seasonally adjusted 2 183 000 during the business week ended on November 20th from 2 207 000 in the preceding week. The latter represented an increase by 34 000 compared to the revised down number of claims reported in the week ended on November 6th. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago.

The Department of Labor is to release the weekly report at 13:30 GMT.

Non-Manufacturing PMI by the ISM

Activity in United States’ sector of services probably slowed down in November, with the corresponding non-manufacturing PMI coming in at a reading of 58.0, according to the median forecast by experts, down from 59.1 in October. The latter has been the highest PMI reading since July, when a level of 60.3 was reported. If expectations were met, November would be the 71st 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 62.0 in October, up from a reading of 56.7 in the prior month. The Employment Index advanced to 59.2 in October from 58.3 in September, while marking growth for the 20th month in a row, according to data by the Institute for Supply Management (ISM). The Prices Index rose to 49.1 in October from 48.4 in September, which indicated prices declined in October for a second month in a row. The Non-Manufacturing Business Activity Index advanced to 63.0 in October from 60.2 in September, indicating growth for a 75th straight month.

Among the 17 services industries, 14 reported growth in October.

In case the general non-Manufacturing PMI slowed down more than anticipated in November, this would have a strong bearish effect on the US dollar.

Factory orders

Factory orders in the United States probably rose 1.3% in October compared to September, following two consecutive months of decline. If expectations were met, this would be the fastest monthly rate of increase since June 2015, when a 1.8% expansion was reported. In September the general index registered a 1.0% drop. Excluding the sector of transportation, factory orders went down 0.6% in September. This indicator reflects the total value of new purchase orders, placed at manufacturers for durable and non-durable goods, and can provide insight into inflation and growth in the US sector of manufacturing. In case new orders rose at a faster-than-anticipated rate, this would have a moderate bullish effect on the US dollar, as it implies future growth acceleration. The US Census Bureau will release the official data at 15:00 GMT.

Yellen testimony

Today the Fed Chair Janet Yellen is expected to testify before a joint committee of Congress.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.630% on December 2nd, after which it closed at 0.619% to add 2.4 basis points (0.024 percentage point) compared to December 1st. It has been the fourth gain in the past eight trading days.

The yield on US 2-year government bonds climbed as high as 0.954% on December 2nd, after which it closed at 0.942% to add 3.1 basis points (0.031 percentage point) compared to December 1st. It has been the eleventh gain in the past thirteen trading days.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.323% on December 2nd from 0.316% on December 1st. The December 2nd yield spread has been the largest one since August 4th, when the difference was 0.331%.

Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.534% on December 2nd, after which it slid to 1.515% at the close to add 2.2 basis points (0.022 percentage point) compared to December 1st. It has been the third gain in the past eight trading days.

The yield on US 10-year government bonds climbed as high as 2.201% on December 2nd, after which it slipped to 2.185% at the close to add 4 basis points (0.04 percentage point) compared to December 1st. It has been the first gain in the past eight trading days.

The spread between 10-year US and 10-year Canadian bond yields widened to 0.670% on December 2nd from 0.652% on December 1st. The December 2nd yield difference has been the largest one since September 18th, when the spread was 0.672%.