Forex Market: USD/CAD trading outlook for August 24th 2016

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.2859-1.2951. The pair closed at 1.2914, edging down 0.25% compared to Mondays close. It has been the 153rd drop in the past 322 trading days. The major pair has increased its slump to 0.88% so far during the current month, following a 0.80% gain in July.

At 8:10 GMT today USD/CAD was edging up 0.15% on the day to trade at 1.2934. The pair touched a daily high at 1.2954 during late Asian trade, undershooting the upper range breakout level (R4), and a daily low at 1.2912 during the early phase of the Asian trading session.

Meanwhile, crude oil futures marked their 83rd gain out of the past 177 trading days on August 23rd. Oil for October delivery went up as high as $48.32 per barrel and closed at $48.10, advancing 1.46% compared to Monday’s close. As of 8:05 GMT today the commodity was losing 1.62% to trade at $47.32, after going down as low as $47.13 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.

On Wednesday USD/CAD trading may be influenced by the following macroeconomic report listed below.

Fundamentals

United States

Existing Home Sales

The index of existing home sales in the United States probably dropped 0.4% to a level of 5.51 million in July compared to June, according to the median estimate by experts. In June sales were 1.1% higher from a month ago to reach 5.57 million, or a level unseen since February 2007. Sales of new single-family houses rose at a monthly rate of 0.8% in June, while sales of condos surged 3.2%. At the same time, the average sales price was 4% higher from a month ago.

In case the index decreased at a steeper monthly rate than anticipated, this would have a limited-to-moderate bearish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 14:00 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.560% on August 23rd, after which it closed at 0.557% to add 0.005 percentage point compared to August 22nd.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.762% on August 23rd, after which it fell to 0.761% at the close to add 1.9 basis points (0.019 percentage point) compared to August 22nd.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.204% on August 23rd from 0.190% on August 22nd. The August 23rd yield spread has been the largest one since August 11th, when the difference was 0.208%.

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 – 1.2922
R2 – 1.2931
R3 (Range Resistance – Sell) – 1.2939
R4 (Long Breakout) – 1.2965
R5 (Breakout Target 1) – 1.2994
R6 (Breakout Target 2) – 1.3006

S1 – 1.2906
S2 – 1.2897
S3 (Range Support – Buy) – 1.2889
S4 (Short Breakout) – 1.2863
S5 (Breakout Target 1) – 1.2834
S6 (Breakout Target 2) – 1.2822

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

Central Pivot Point – 1.2871
R1 – 1.2977
R2 – 1.3084
R3 – 1.3190
R4 – 1.3297

S1 – 1.2764
S2 – 1.2658
S3 – 1.2551
S4 – 1.2445

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

Central Pivot Point – 1.3038
R1 – 1.3244
R2 – 1.3460
R3 – 1.3666
R4 – 1.3872

S1 – 1.2822
S2 – 1.2616
S3 – 1.2400
S4 – 1.2184