Forex Market: USD/CAD trading outlook for September 12th 2016

Friday’s trade (in GMT terms) saw USD/CAD within the range of 1.2910-1.3054. The pair closed at 1.3050, rising 0.87% compared to Thursdays close. It has been the 177th gain in the past 335 trading days, a third consecutive one and also the steepest one since August 5th. The daily high has been a level unseen since September 2nd, when a high of 1.3116 was registered. In weekly terms, USD/CAD added 0.48% to its value during the past week. It has been the 13th gain in the past 36 weeks, but yet, the smallest one since the week ended on May 15th. The major pair has pared its slump to 0.42% so far during the current month, following a 0.59% gain in August.

At 8:26 GMT today USD/CAD was edging up 0.38% on the day to trade at 1.3100. The pair touched a daily high at 1.3103 during early European trade, undershooting the upper range breakout level (R4), and a daily low at 1.3036 during the early phase of the Asian trading session.

Meanwhile, crude oil futures marked their 100th drop out of the past 189 trading days on September 9th. Oil for October delivery went down as low as $45.56 per barrel and closed at $45.88, plummeting 3.65% compared to Thursday’s close. As of 8:20 GMT today the commodity was retreating 1.61% to trade at $45.14, after going down as low as $44.85 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.

No relevant macroeconomic reports and other events, which may influence USD/CAD trading, are scheduled on Monday.

Correlation with other Majors

Taking into account the business week ended on September 9th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

USD/CAD to USD/CHF (0.5439, or strong)
USD/CAD to USD/JPY (0.4723, or moderate)
USD/CAD to EUR/USD (-0.1361, or weak)
USD/CAD to NZD/USD (-0.6803, or strong)
USD/CAD to GBP/USD (-0.8449, or very strong)
USD/CAD to AUD/USD (-0.9123, or very strong)

1. During the examined period USD/CAD moved strongly in the opposite direction compared to NZD/USD, while moving strongly in one and the same direction with USD/CHF.

2. USD/CAD moved almost equally in the opposite direction compared to GBP/USD and AUD/USD during the past week. This relationship has been the most pronounced between USD/CAD and AUD/USD.

3. The correlation between USD/CAD and EUR/USD was insignificant.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went as high as 0.596% on September 9th, or the highest level since September 6th (0.601%), after which it closed at 0.583% to add 1.4 basis points (0.014 percentage point) compared to September 8th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.802% on September 9th, after which it fell to 0.782% at the close to add 0.008 percentage point compared to September 8th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, narrowed to 0.199% on September 9th from 0.205% on September 8th. The September 9th yield spread has been the lowest one since September 7th, when the difference was 0.193%.

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 – 1.3063
R2 – 1.3076
R3 (Range Resistance – Sell) – 1.3090
R4 (Long Breakout) – 1.3129
R5 (Breakout Target 1) – 1.3175
R6 (Breakout Target 2) – 1.3196

S1 – 1.3037
S2 – 1.3024
S3 (Range Support – Buy) – 1.3010
S4 (Short Breakout) – 1.2971
S5 (Breakout Target 1) – 1.2925
S6 (Breakout Target 2) – 1.2904

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

Central Pivot Point – 1.2976
R1 – 1.3128
R2 – 1.3207
R3 – 1.3359
R4 – 1.3512

S1 – 1.2897
S2 – 1.2745
S3 – 1.2666
S4 – 1.2588

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