USD/CAD Fundamental Analysis – week of August 29, 2016 – Forecast

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Published: Aug 27, 2016, 05:18 UTC

The USD/CAD closed at 1.2984 with a gain of 0.86% as oil prices were stronger, gold was lower and the US dollar rallied. The pair was trading as strong as

USD/CAD Fundamental Analysis – week of August 29, 2016 – Forecast

The USD/CAD closed at 1.2984 with a gain of 0.86% as oil prices were stronger, gold was lower and the US dollar rallied. The pair was trading as strong as 1.29 and is expected to sit still this week. The Canadian dollar dipped as low as 76.87 cents U.S. on Friday after Fed Chair Janet Yellen declared the case for higher interest rates has gained strength recently.

“I think [the loonie will] probably strengthen through the end of the year because once the initial reaction to the speech wears off and there’s no hike in September, then the (U.S.) dollar starts to weaken a little bit compared to ours,” he said.

In spite of that, Courtis believes the Canadian dollar is due to plummet in a continuation of the dive that saw the loonie dip below 68 cents U.S. in January.

Canada’s economic recovery is lagging so far behind the U.S. that even a rebound in crude prices is failing to boost the nation’s currency.

The four-week correlation between the Canadian dollar and crude fell to an 18-month low last week. With oil surging 8 per cent in August, the loonie is up just 0.5 per cent, trailing other commodity-linked currencies such as the Norway’s krone and the Mexico’s peso.

Canada’s relative economic weakness, highlighted Aug. 5 when jobs data showed America’s economy continues to gain traction while Canada’s slips, has overtaken oil as the major driver for the loonie. Yet the currency’s uncoupling from crude may prove a blessing for Bank of Canada Governor Stephen Poloz, who is counting on non-energy exporters to spearhead the country’s economic comeback.

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Week beginning August 29, 2016

Date	Country	Name	Volatility	Previous	Consensus
8/31/2016	EUR	Unemployment Rate	3	6.1	6.1
8/31/2016	EUR	Unemployment Change	3	-7	-4
8/31/2016	EUR	Consumer Price Index – Core	3	0.9
8/31/2016	EUR	Consumer Price Index (YoY)	3	0.2	0.3
9/1/2016	USD	ISM Manufacturing PMI	3	52.6	52.4
9/1/2016	USD	ISM Prices Paid	3	55
9/2/2016	USD	Unemployment Rate	3	4.9	4.8
9/2/2016	USD	Nonfarm Payrolls	3	255	164