Forex Market: USD/CAD trading outlook for September 20th 2016

Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3136-1.3226. The pair closed at 1.3203, inching down 0.05% compared to Fridays close. It has been the 161st drop in the past 341 trading days. The major pair has trimmed its advance to 0.75% so far during the current month, following a 0.59% gain in August.

At 8:11 GMT today USD/CAD was inching down 0.04% on the day to trade at 1.3198. The pair touched a daily high at 1.3217 during late Asian trade, undershooting the daily R2 level, and a daily low at 1.3190 during the early phase of the European trading session.

Meanwhile, crude oil futures marked their 92nd gain out of the past 195 trading days on September 19th. Oil for November delivery went up as high as $44.70 per barrel and closed at $43.86, edging up 0.55% compared to Friday’s close. As of 8:07 GMT today the commodity was losing 0.66% to trade at $43.57, after going down as low as $43.46 per barrel earlier. Crude oil prices and CAD valuation tend to be strongly positively correlated.

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

Fundamentals

United States

Housing Starts and Building Permits

The number of housing starts in the United States probably fell 1.7% to 1.190 million units in August, according to market expectations, from the seasonally adjusted annual rate of 1.211 million during the prior month. The latter has been the highest number of starts since February, when a revised up level of 1.213 million was reported. In July, starts of single-family houses increased at a monthly rate of 0.5% to 770 000, while starts of buildings with five units or more rose 8.3% to reach 433 000. During the month, housing starts marked the largest increase in the Northeast (15.5%), followed by those in the South (3.5%) and those in the Midwest area (2.3%). On the other hand, housing starts were fewer in the West region (-5.9%).

Meanwhile, the number of building permits in the country probably went up 2.5% to 1.170 million in August from a revised down annual level of 1.144 million in July (1.152 million previously). If expectations were met, this would be the highest level since February, when the revised up 1.177 million units were reported. Single-family authorizations rose at a monthly rate of 3.7% to reach 711 000 units in July, while permits for buildings with five units or more were reported to have increased 6.5% to 411 000. Authorizations were fewer in the Northeast area (-10.2%) and in the West (-8%), while increasing in the Midwest region (10.5%) and in the South (2.6%).

In case a higher-than-anticipated figure for either of the two indicators is reported, this would have a moderate bullish effect on the US dollar. The official housing data are due out at 12:30 GMT.

Canada

BoC Poloz Statement

At 16:30 GMT Bank of Canada Governor, Stephen Poloz, is expected to take a statement. Any remarks made in regard to the Bank’s policy stance or Canada’s economic outlook would certainly boost CAD volatility.

Bond Yield Spread

The yield on Canada’s 2-year government bonds went up as high as 0.608% on September 19th, or the highest level since September 13th (0.610%), after which it closed at 0.584% to add 0.003 percentage point compared to September 16th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.782% on September 19th, or the highest level since September 14th (0.802%), after which it fell to 0.778% at the close to add 0.008 percentage point compared to September 16th.

The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.194% on September 19th from 0.189% on September 16th. The September 19th yield spread has been the largest one since September 13th, when the difference was 0.200%.

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 – 1.3211
R2 – 1.3220
R3 (Range Resistance – Sell) – 1.3228
R4 (Long Breakout) – 1.3253
R5 (Breakout Target 1) – 1.3281
R6 (Breakout Target 2) – 1.3293

S1 – 1.3195
S2 – 1.3187
S3 (Range Support – Buy) – 1.3178
S4 (Short Breakout) – 1.3154
S5 (Breakout Target 1) – 1.3125
S6 (Breakout Target 2) – 1.3113

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

Central Pivot Point – 1.3163
R1 – 1.3296
R2 – 1.3382
R3 – 1.3515
R4 – 1.3648

S1 – 1.3077
S2 – 1.2944
S3 – 1.2858
S4 – 1.2772

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