Forex Market: USD/CAD trading outlook for September 9th 2016

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.2851-1.2941. The pair closed at 1.2937, edging up 0.41% compared to Wednesdays close. It has been the 176th gain in the past 334 trading days and also a second consecutive one. The daily high has been a level unseen since September 5th, when a high of 1.3000 was registered. The major pair has pared its slump to 1.28% so far during the current month, following a 0.59% gain in August.

At 8:31 GMT today USD/CAD was edging up 0.13% on the day to trade at 1.2954. The pair touched a daily high at 1.2959 during early European trade, undershooting the range resistance level (R3), and a daily low at 1.2910 during the late phase of the Asian trading session.

Meanwhile, crude oil futures marked their 89th gain out of the past 188 trading days on September 8th. Oil for October delivery went up as high as $47.75 per barrel, or a level unseen since August 26th, and closed at $47.62, surging 4.66% compared to Wednesday’s close. As of 8:27 GMT today the commodity was retreating 1.26% to trade at $47.02, after going down as low as $46.98 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.

On Friday USD/CAD trading may be influenced by the following macroeconomic reports and other events as listed below.

Fundamentals

United States

Fed Speakers

At 11:45 GMT the Fed President for Boston and a FOMC member, Eric Rosengren, is expected to take a statement, followed by the Fed President for Dallas and also a member of the Committee, Robert Kaplan, at 13:30 GMT. Any remarks made in regard to the Bank’s monetary policy stance or the US economic outlook would certainly boost USD volatility.

Wholesale Inventories

The value of goods inventories, held at US wholesalers, probably rose at a monthly rate of 0.1% in July, according to market expectations. If so, this would be the fifth consecutive month of expansion. In June inventories went up by another 0.3%. In case wholesale inventories grew at a faster rate than projected in July, this would have a limited-to-moderate bearish effect on the US Dollar. The Census Bureau is to release the official report at 14:00 GMT.

Canada

Housing Starts

The number of housing starts in Canada probably dropped to the seasonally adjusted annual level of 190 000 in August from 198 395 in July. If expectations were met, this would be the lowest figure since May, when the revised down 186 700 starts were reported. Urban housing starts fell 9.9% to 182 620 units in July, as the multiple segment registered a 13.3% drop to 123 630 units and the single-detached segment slumped 1.8% to 58 990 units. A decrease in urban housing starts was reported in Quebec, British Columbia, Ontario and Atlantic Canada, while an increase – in the Prairies. At the same time, housing starts in rural areas were reported at 15 775 in July.

Housing starts are considered as a key indicator, reflecting the strength of the nation’s housing sector. In case the number of housing starts decreased more than anticipated in August, this would have a moderate bearish effect on the Canadian dollar. The official report by the Canadian Mortgage and Housing Corporation is due out at 12:15 GMT.

Employment Change, Unemployment Rate

The number of the employed people in Canada probably increased by 15 000 in August, according to market expectations, following an unexpected drop by 31 200 to 18 023 300 in July. The latter has been the most notable monthly decline since November 2015, when persons in employment were 35 700 fewer.

The number of part-time employed persons rose by 40 200 in July from a month ago, while the number of persons in full-time employment went down by 71 400. During the month employment was lower in public administration (-24 000) and higher in health care and social assistance (+28 000).

Meanwhile, the rate of unemployment in the country probably remained at 6.9% for a second straight month in August, according to the median forecast by analysts. In July, the number of people looking for employment rose by 18 500 to 1 344 800.

A higher-than-expected rate of increase in employment and a stable or even lower unemployment rate would have a strong bullish effect on the local currency, due to positive implications in regard to consumer spending. Statistics Canada is expected to release the official employment report at 12:30 GMT.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.583% on September 8th, after which it closed at 0.569% to add 2.4 basis points (0.024 percentage point) compared to September 7th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.782% on September 8th, after which it fell to 0.774% at the close to add 3.6 basis points (0.036 percentage point) compared to September 7th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.205% on September 8th from 0.193% on September 7th. The September 8th yield spread has been the largest one since September 1st, when the difference was 0.223%.

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 – 1.2945
R2 – 1.2954
R3 (Range Resistance – Sell) – 1.2962
R4 (Long Breakout) – 1.2987
R5 (Breakout Target 1) – 1.3015
R6 (Breakout Target 2) – 1.3028

S1 – 1.2929
S2 – 1.2921
S3 (Range Support – Buy) – 1.2912
S4 (Short Breakout) – 1.2888
S5 (Breakout Target 1) – 1.2859
S6 (Breakout Target 2) – 1.2846

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

Central Pivot Point – 1.3040
R1 – 1.3097
R2 – 1.3207
R3 – 1.3264
R4 – 1.3322

S1 – 1.2930
S2 – 1.2873
S3 – 1.2763
S4 – 1.2654

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

Central Pivot Point – 1.3024
R1 – 1.3283
R2 – 1.3462
R3 – 1.3721
R4 – 1.3981

S1 – 1.2845
S2 – 1.2586
S3 – 1.2407
S4 – 1.2229