Forex Market: USD/CAD daily trading outlook

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3157-1.3254. The pair closed at 1.3189, inching up 0.01% compared to Tuesdays close. It has been the 165th gain in the past 303 trading days. The daily high has been the highest level since March 28th, when a high of 1.3287 was registered. The major pair has pared its advance to 2.05% so far during the current month, following a 1.29% slump in June.

At 8:04 GMT today USD/CAD was shedding 0.51% on the day to trade at 1.3122. The pair touched a daily high at 1.3191 during early Asian trade, undershooting the daily R1 level, and a daily low at 1.3101 during the early phase of the European trading session.

Meanwhile, crude oil futures marked their 87th drop out of the past 158 trading days on July 27th. Oil for September delivery went down as low as $41.68 per barrel, or a level unseen since April 20th, and closed at $41.92, losing 2.33% compared to Tuesday’s close. As of 8:13 GMT today the commodity was edging up 0.12% to trade at $41.97, after going down as low as $41.86 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.

On Thursday USD/CAD trading may be influenced by the following macroeconomic report 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 July 22nd, probably rose to 260 000, according to market consensus, from 253 000 in the preceding week. The latter has been the lowest number of claims since the business week ended on April 15th, when a revised up 248 000 claims were reported.

The 4-week moving average, an indicator lacking seasonal effects, was 257 750, marking a drop by 1 250 compared to the preceding weeks unrevised average.

The business week, which ended on July 15th, has been the 72nd consecutive week, when jobless claims stood below the 300 000 threshold, which suggested a healthy labor market. It has been the longest streak in 43 years.

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 rose to the seasonally adjusted 2 130 000 during the business week ended on July 15th, according to the median forecast by experts, from 2 128 000 in the preceding week. The latter represented a drop by 25 000 compared to the revised up number of claims reported in the week ended on July 1st. 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 US Department of Labor is to release the weekly report at 12:30 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.605% on July 27th, or the highest level since July 22nd (0.607%), after which it closed at 0.578% to lose 1.7 basis points (0.017 percentage point) compared to July 26th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.778% on July 27th, or matching the high from a day ago, while also being the highest level since June 23rd (0.787%), after which it fell to 0.722% at the close to lose 3.6 basis points (0.036 percentage point) compared to July 26th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.144% on July 27th from 0.163% on July 26th. The July 27th yield spread has been the lowest one since July 21st, when the difference was 0.115%.

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 – 1.3198
R2 – 1.3207
R3 (Range Resistance – Sell) – 1.3216
R4 (Long Breakout) – 1.3242
R5 (Breakout Target 1) – 1.3274
R6 (Breakout Target 2) – 1.3286

S1 – 1.3180
S2 – 1.3171
S3 (Range Support – Buy) – 1.3162
S4 (Short Breakout) – 1.3136
S5 (Breakout Target 1) – 1.3104
S6 (Breakout Target 2) – 1.3092

By using the traditional method of calculation, the weekly levels of importance for USD/CAD are presented as follows:

Central Pivot Point – 1.3078
R1 – 1.3234
R2 – 1.3341
R3 – 1.3497
R4 – 1.3652

S1 – 1.2971
S2 – 1.2815
S3 – 1.2708
S4 – 1.2600

In monthly terms, for USD/CAD we have the following pivots:

Central Pivot Point – 1.2907
R1 – 1.3163
R2 – 1.3401
R3 – 1.3657
R4 – 1.3913

S1 – 1.2669
S2 – 1.2413
S3 – 1.2175
S4 – 1.1937