Yesterday’s trade saw USD/CAD within the range of 1.3086-1.3281. The pair closed at 1.3192, falling 0.57% on a daily basis, or at the most considerable rate since October 14th, when it went down 0.79%. The daily high has been the highest level since October 1st, when a high of 1.3334 was registered.
USD/CAD managed to pare earlier losses on Wednesday, supported by prospects of a rate hike at the Federal Reserves final policy meeting for the year, scheduled in December. In addition, policymakers dropped prior warnings in regard to the risks global financial and economic developments were posing to economic activity in the United States.
At 9:51 GMT today USD/CAD was up 0.17% for the day to trade at 1.3216. The pair touched a daily high at 1.3238 at 8:35 GMT, undershooting the range resistance level (R3). USD/CAD remains above the weekly central pivot point (1.3087) for a fourth straight trading day.
On Thursday USD/CAD trading may be influenced by an array of macroeconomic reports as listed below.
Fundamentals
United States
Initial, Continuing Jobless Claims
The number of people in the United States, who filed for unemployment assistance for the first time during the business week ended on October 23rd, probably increased to 262 000, according to market expectations, from 259 000 in the previous week.
The 4-week moving average, an indicator lacking seasonal effects, was 263 250, marking a decrease of 2 000 compared to the preceding weeks revised up average. It has been the lowest level for this average since December 15th 1973, when 256 750 claims were reported.
The business week, which ended on October 16th has been the 33rd consecutive week, when jobless claims stood below the 300 000 threshold.
Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or increased further, this would have a moderate bearish effect on the US dollar.
The number of continuing jobless claims probably decreased to the seasonally adjusted 2 160 000 during the business week ended on October 16th, from 2 170 000 in the prior week. The latter represented an increase by 6 000 compared to the revised up number of claims reported in the week ended on October 2nd. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago.
The Department of Labor is to release the weekly report at 12:30 GMT.
Gross Domestic Product – preliminary estimate
The preliminary estimate of the US Gross Domestic Product probably pointed to an annualized rate of growth of 1.6% in the third quarter of the year, according to expectations. The final GDP estimate for Q2, reported on September 25th, pointed to an annual growth of 3.9%, a revision up compared to the preliminary and the second GDP estimates. It has also been the fastest annual rate of growth since Q3 2014, when US economy expanded at a final rate of 5.0%.
Consumer spending in the country rose 3.6% year-on-year in the second quarter of 2015, up from a 3.1% expansion in the second estimate, and following a 1.8% increase in the previous quarter.
Housing investment was up 9.3% year-on-year in Q2, up from a 7.8% increase in the second estimate, and following a 10.1% increase in the first quarter of the year.
Business investment expanded at an annualized rate of 4.1% in Q2, accelerating from a 3.2% increase in the second estimate, and following a 1.6% expansion in the first quarter.
Government purchases were up 2.6% year-on-year in Q2, or in line with the second estimate and rebounding from a 0.1% drop in the preceding quarter.
US exports rose at an annualized rate of 5.1% in Q2, slowing down from a 5.2% growth in the second estimate, while following a 6.0% slump in Q1. US imports climbed 3.0% year-on-year in the second quarter, also slowing down from a 2.8% increase in the second estimate and down from a 7.1% gain in the first quarter, according to data by the US Department of Commerce.
In case a slower-than-projected rate of growth is reported in Q3, this would have a substantial bearish effect on the US dollar. The preliminary GDP report is due out at 12:30 GMT.
Pending Home Sales
The index of pending home sales in the United States probably rose 1.0% in September compared to August, according to the median estimate by experts, following a 1.4% slump in the prior month. If so, this would be the sharpest monthly rate of increase since April 2015, when pending home sales went up 3.4%.
In annual terms, the index of pending home sales rose 6.1% in August, or at the slowest pace since December 2014, when a climb rate of 6.1% was reported as well.
When a sales contract is accepted for a property, it is recorded as a pending home sale. As an indicator the index provides information on the number of future home sales, which are in the pipeline. It gathers data from real estate agents and brokers at the point of a sale and is currently the most accurate indicator regarding the US housing sector. It samples over 20% of the market. In addition, over 80% of pending house sales are converted to actual home sales within 2 or 3 months. Therefore, this index has a predictive value about actual home sales.
In case pending home sales increased more than anticipated, this would have a moderate bullish effect on the greenback. The National Association of Realtor’s (NAR) will release the official index value at 14:00 GMT.
Canada
Industrial Product Price Index
Prices of industrial products in Canada probably dropped for a second consecutive month in September, down at a monthly rate of 0.2%, according to expectations. In August prices were down 0.3%, following three successive months of increases. This index measures the change in prices of industrial goods, sold by manufacturers in the country. It is also used as an indicator of commodity inflation. In case a larger-than-anticipated decrease in prices is reported, this would have a limited bearish effect on the local dollar, as the latter tends to be sensitive to changes in commodity prices. Statistics Canada is to release the official data at 12:30 GMT.
Bond Yield Spread
The yield on Canada’s 2-year government bonds went as high as 0.544% on October 28th, or the highest level since October 23rd (0.555%), after which it closed at the exact same level to add 5.1 basis points (0.051 percentage point) compared to October 27th. It has been the first increase in the past three trading days.
The yield on US 2-year government bonds climbed as high as 0.723% on October 28th, or the highest level since September 25th (0.743%), after which it closed at 0.715% to add 9.4 basis points (0.094 percentage point) compared to October 27th. It has been the first gain in the past three trading days.
The spread between 2-year US and 2-year Canadian bond yields, which reflects the flow of funds in a short term, expanded to 0.171% on October 28th from 0.128% on October 27th. The October 28th yield spread has been the largest one since September 24th, when the difference was 0.178%.
Meanwhile, the yield on Canada’s 10-year government bonds soared as high as 1.482% on October 28th, or the highest level since October 26th (1.508%), after which it closed at the exact same level to add 6.2 basis points (0.062 percentage point) compared to October 27th. It has been the first gain in the past three trading days.
The yield on US 10-year government bonds climbed as high as 2.108% on October 28th, or the highest level since October 9th (2.138%), after which it slipped to 2.092% at the close to add 5.5 basis points (0.055 percentage point) compared to October 27th. It has been the first gain in the past three trading days.
The spread between 10-year US and 10-year Canadian bond yields narrowed to 0.610% on October 28th from 0.617% on October 27th. The October 28th yield difference has been the lowest one since October 23rd, when the spread was 0.581%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for USD/CAD are presented as follows:
R1 – 1.3210
R2 – 1.3228
R3 (range resistance) – 1.3246
R4 (range breakout) – 1.3300
S1 – 1.3174
S2 – 1.3156
S3 (range support) – 1.3138
S4 (range breakout) – 1.3085
By using the traditional method of calculation again, the weekly pivot levels for USD/CAD are presented as follows:
Central Pivot Point – 1.3087
R1 – 1.3277
R2 – 1.3390
R3 – 1.3580
S1 – 1.2974
S2 – 1.2784
S3 – 1.2671
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