USD/CAD Fundamental Analysis – Forecast for the week of August 15, 2016

The USD/CAD closed the week near its lowest level falling 1.64% this week as the CAD continues to absorb the weak jobs report released a week ago. The rebound in oil prices helped support the Canadian dollar. The pair is trading at 1.2952 and is neutral moving into the new week. The Canadian dollar touched a four-week high against the American dollar on Friday as oil prices extended their recent rebound and weak U.S. retail figures pressured the greenback.

Oil futures jumped a dollar to settle at $44.49 US a barrel in New York trading over the noon hour. There’s speculation that OPEC oil producers could take some action at next month’s informal meeting in Algiers to prop up the market.

Oil is on track to record its best week since April, according to Bloomberg data, with prices up better than six per cent.

The U.S. dollar ended the week lower against most major currencies.  We saw some dollar weakness at the start of the week but the disappointing retail sales report sealed the fate for the greenback.   Consumer spending stagnated in the month of July and dropped -0.1% excluding auto and gas purchases.

Producer prices fell -0.4% which was a huge surprise considering that economists anticipated a 0.1% rise.  Consumer confidence on the other hand strengthened, according to the University of Michigan consumer sentiment survey but the increase may not have been as large as some many have hoped.  While the dollar took a hit this week we believe that a recovery is ahead.

The recent increase in wage growth and decline in gas prices should bolster consumer consumption in August.  At the end of the day, there is nothing more influential to the direction of currencies than interest rates and we saw that very clearly this past week as the dollar traded higher against all of the major currencies

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