Yesterday’s trade saw USD/CAD within the range of 1.4484-1.4654. The pair closed at 1.4546, falling 0.24% on a daily basis. It has been the first drop in the past eleven trading days. The daily high has been the highest level since April 24th 2003, when a high of 1.4672 was registered.
At 9:31 GMT today USD/CAD was losing 0.66% for the day to trade at 1.4466. The pair touched a daily low at 1.4444 at 7:20 GMT, overshooting the lower range breakout level (S4), and a daily high at 1.4563 during the early hours of the Asian trading session. Support may be received at the hourly 100-period EMA (1.4429) and then – at the psychological 1.4400 level. Resistance may be observed at the hourly 55-period EMA (1.4484), then – at the hourly 21-period EMA (1.4502) and finally – in the area around the current daily high (1.4563).
The Canadian dollar has recently been heavily pressured by a persistent decline in prices of crude oil. The commodity has fallen in 13 out of the past 22 trading days. Oil futures for March delivery were up 2.26% on the day to trade at $30.70 per barrel as of 9:46 GMT, after going up as high as $30.86 earlier. On January 15th the commodity touched a low of $29.13 per barrel, or a level unseen since late October 2003. Oil has slumped 17.13% so far during the current month.
On Tuesday USD/CAD trading may be influenced by the following macroeconomic reports listed below.
Fundamentals
United States
NAHB Housing Market Index
The National Association of Home Builders (NAHB) Housing Market Index probably remained at 61.0 for the second consecutive month in January, according to market expectations. If so, this would be the 19th consecutive month, when the gauge stood in the area above 50.0. In November the index was reported at 62.0. The indicator is based on a monthly survey in regard to current home sales and expected sales in the coming six months. Values above the key level of 50.0 indicate that housing market conditions are good. Therefore, higher-than-projected readings would provide a moderate support to the US dollar. The official report is scheduled for release at 15:00 GMT.
Canada
Foreign Portfolio Investment in Securities
Foreign portfolio investment in Canadian securities probably expanded to CAD 5.1 billion in October, according to the median forecast by experts, from CAD 3.35 billion in September. If expectations were met, it would be the largest flow of portfolio investments since June 2015, when it was reported to have amounted to CAD 8.51 billion. This indicator reflects the flow of incoming investments in the local stock, bond and money markets. An increasing flow of foreign investments is usually related with a positive economic outlook for the country being invested in. This usually increases demand for its currency and vice versa. Therefore, in case portfolio investment in Canadian securities increased more than anticipated, this would have a moderate bullish effect on the Canadian dollar. The official report by the Statistics Canada is due out at 13:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.410% on January 18th, or the highest level since January 11th (0.444%), after which it closed at 0.307% to add 1.9 basis points (0.019 percentage point) compared to January 15th. It has been the 9th gain in the past 23 trading days.
The yield on US 2-year government bonds climbed as high as 0.854% on January 18th, after which it closed at 0.849% to lose 0.001 percentage point compared to January 15th. It has been the 16th drop in the past 24 trading days and also a fifth consecutive one.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, shrank to 0.542% on January 18th from 0.562% on January 15th. The January 18th yield spread has been the lowest one since January 8th, when the difference was 0.518%.
Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.170% on January 18th, after which it slid to 1.160% at the close to add 0.008 percentage point compared to January 15th. It has been the 8th gain in the past 23 trading days.
The yield on US 10-year government bonds climbed as high as 2.047% on January 18th, after which it slipped to 2.045% at the close to add 0.008 percentage point compared to January 15th. It has been the 10th gain in the past 24 trading days.
The spread between 10-year US and 10-year Canadian bond yields remained unchanged at 0.885% on January 18th compared to January 15th. The January 18th yield difference has been the largest one since December 30th, when the spread was 0.893%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.4562
R2 – 1.4577
R3 (range resistance) – 1.4593
R4 (range breakout) – 1.4640
S1 – 1.4530
S2 – 1.4515
S3 (range support) – 1.4499
S4 (range breakout) – 1.4453
By using the traditional method of calculation, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.4385
R1 – 1.4709
R2 – 1.4877
R3 – 1.5201
S1 – 1.4217
S2 – 1.3893
S3 – 1.3725
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