Yesterday’s trade (in GMT terms) saw USD/CAD within the range of 1.3109-1.3234. The pair closed at 1.3230, rising 0.88% compared to Wednesdays close. It has been the 189th gain in the past 364 trading days, a second consecutive one and also the sharpest one since September 23rd. The daily high has been a level not seen since October 13th, when a high of 1.3308 was registered. The major pair has neutralized earlier loss and is now up 0.78% so far during the current month, following a 0.18% gain in September.
At 8:10 GMT today USD/CAD was edging up 0.10% on the day to trade at 1.3243. The pair touched a daily high at 1.3256 during early European trade, overshooting the daily R2 level, and a daily low at 1.3224 during the late phase of the Asian trading session.
On Friday USD/CAD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United States
Fed’s Tarullo speech
At 14:15 GMT Federal Reserve Governor and also a voting member of the FOMC, Daniel Tarullo, is expected to speak in New York on “Pedagogy and Scholarship in a Post-Crisis World” at the Columbia Law School Conference on the New Pedagogy of Financial Regulation. Any hints on the Bank’s policy stance would heighten USD volatility.
Canada
Retail Sales
Retail sales in Canada probably rebounded at a monthly rate of 0.3% in August, according to the median forecast by experts, following an unexpected 0.1% drop in the prior month.
In July, lower sales were observed at gasoline stations (-3.0%, or the first decrease in the past four months) and at furniture and home furnishings stores (-1.4%). On the other hand, higher sales were registered at clothing and clothing accessories stores (+1.6%) and at building material and garden equipment and supplies dealers (+1.5%).
Retail sales, excluding sales of automobiles, probably rebounded 0.3% in August compared to July, following two straight months of decline. In July, core sales went down 0.1%. Large-ticket purchases are excluded due to their high volatility, which could influence the general trend. In case general retail sales rebounded at a faster rate than anticipated in August, this would have a moderate bullish effect on the Canadian dollar. Statistics Canada is to release the official report at 12:30 GMT.
Consumer Price Inflation
The annualized consumer inflation in Canada probably accelerated to 1.5% in September, according to market expectations, from 1.1% in August. The latter has been the lowest annual inflation since October 2015.
In August, prices of food rose 1.1% year-on-year, following a 1.6% increase in the previous month. Consumers also paid more for shelter during the month (a 1.7% year-on-year increase, or matching the rate of growth in July), recreation, education and reading (a 1.1% increase, following a 1.9% surge in July) and transportation (a 0.3% gain, following a 0.2% drop in the preceding month). On the other hand, cost of gasoline dropped 11.5% in August from a year ago, slowing down from a 14.0% slump in July, according to the report by the Statistics Canada.
Bank of Canada’s (BoC) annualized core inflation, which excludes prices of fruits, vegetables, gasoline, fuel oil, natural gas, mortgages, intercity transportation, and tobacco products, probably remained at 1.8% for a second consecutive month in September, according to market expectations. It has been the lowest rate since July 2014. In July this year core inflation was registered at 2.1%. This is the key measure of inflation, on which the central bank bases its decisions regarding monetary policy. In case the general CPI met expectations or accelerated even further in September, this would have a strong bullish effect on the Canadian dollar. The official CPI report by the Statistics Canada is due out at 12:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went up as high as 0.570% on October 20th, after which it closed at 0.552% to lose 1 basis point (0.01 percentage point) compared to October 19th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.827% on October 20th, after which it fell to 0.826% at the close to add 2.3 basis points (0.023 percentage point) compared to October 19th.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, widened to 0.274% on October 20th from 0.241% on October 19th. The October 20th yield spread has been the largest one since June 5th, when the difference was 0.277%.
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 – 1.3241
R2 – 1.3253
R3 (Range Resistance – Sell) – 1.3264
R4 (Long Breakout) – 1.3299
R5 (Breakout Target 1) – 1.3339
R6 (Breakout Target 2) – 1.3356
S1 – 1.3219
S2 – 1.3207
S3 (Range Support – Buy) – 1.3196
S4 (Short Breakout) – 1.3161
S5 (Breakout Target 1) – 1.3121
S6 (Breakout Target 2) – 1.3104
By using the traditional method of calculation, the weekly levels of importance for USD/CAD are presented as follows:
Central Pivot Point – 1.3183
R1 – 1.3264
R2 – 1.3388
R3 – 1.3469
R4 – 1.3549
S1 – 1.3059
S2 – 1.2978
S3 – 1.2854
S4 – 1.2729
In monthly terms, for USD/CAD we have the following pivots:
Central Pivot Point – 1.3077
R1 – 1.3332
R2 – 1.3535
R3 – 1.3790
R4 – 1.4044
S1 – 1.2874
S2 – 1.2619
S3 – 1.2416
S4 – 1.2212
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