USD/CAD Weekly Fundamental Analysis Aug 6-10, 2012, Forecast

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Introduction: The Canadian Dollar moves in reaction to the US Dollar. Movements are small and easy to track and trade. The Canadian Dollar also responds to economic reports within Canada. It has little action against foreign currencies except during major moves or crisis.

The USD/CAD is the single biggest beneficiary of rising oil prices. Canada which is already the biggest exporter of oil to the US will experience a boost to its economy when oil price continue to increase. Therefore, if oil rises the Canadian dollar is likely to follow. Over the past years, the correlation between the Canadian dollar and oil prices has been approximately 81%. 

Weekly Analysis and Recommendation:

The USD/CAD continues to move closer to parity ending the week at 1.0012. There was little in the way of supportive data from Canada and the Looney responded to the value of the USD and to US economic indications. The economy of Canada is very dependent on the US and oil exports.

Date

Last

Open

High

Low

Change %

Aug 03, 2012

1.0012

1.0073

1.0076

0.9980

-0.61%

Aug 02, 2012

1.0073

1.0049

1.0085

1.0003

0.25%

Aug 01, 2012

1.0048

1.0034

1.0057

1.0004

0.14%

Jul 31, 2012

1.0034

1.0015

1.0043

1.0004

0.19%

Jul 30, 2012

1.0015

1.0044

1.0054

1.0014

-0.29%

Markets are closed in Canada on Monday and there is very little on the Canadian calendar until late in the week, at which time we might see some action for the Looney.

Canada’s labor force survey for July is due out on August 10, economists expect the unemployment rate to remain stable at 7.2%. The view that Canadian job growth is due to revert to levels consistent with GDP growth after very strong results in March and April while the economy was fairly flat. Job trends in the medium term follow the relationship between employment growth and overall GDP growth known as Okun’s law  Full-time private sector jobs growth already started to cool in June (-26k) with all of the overall +7.3k job gains attributable to a surge in public sector hiring (+38.9k) without which the overall payrolls number would have been negative. Generally speaking, Canadian jobs numbers tend to get wonky during the summer months due to the fact that there does not seem to be a predictable monthly seasonality to the mass hiring and firing of private-contract education workers during the summer

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week of Aug 30 – Jul 3 actual v. forecast for the Canadian & US Dollar

Date

Currency

Event 

Actual

Forecast

Previous

Jul 31

CAD

GDP m/m

0.1%

0.2%

0.3%

 

USD

CB Consumer Confidence

65.9

61.5

62.7

Aug 1

USD

ADP Non-Farm Employment Change

163K

121K

172K

 

USD

ISM Manufacturing PMI

49.8

50.3

49.7

 

USD

FOMC Statement

     

Aug 2

USD

Unemployment Claims

365K

375K

357K

Aug 3

USD

Non-Farm Employment Change

163K

101K

64K

 

USD

Unemployment Rate

8.3%

8.2%

8.2%

 

USD

ISM Non-Manufacturing PMI

52.6

52.1

52.1

Historical: From 2010 to present

Highest: 1.0853 CAD on May 25, 2010.

Average: 1.0090 CAD over this period.

Lowest: 0.9407  CAD on Jan 26, 2011.

Economic Highlights of the coming week that affect the Canadian and American Markets

Date

Time

Currency

Event 

Previous

Aug 7

12:30

CAD

Building Permits m/m

7.4%

 

14:00

CAD

Ivey PMI

49.0

Aug 8

12:30

USD

Prelim Nonfarm Productivity q/q

-0.9%

 

12:30

USD

Prelim Unit Labor Costs q/q

1.3%

 

14:30

USD

Crude Oil Inventories

 

Aug 9

12:15

CAD

Housing Starts

223K

 

12:30

CAD

Trade Balance

-0.8B

 

12:30

CAD

NHPI m/m

0.3%

 

12:30

USD

Trade Balance

-48.7B

 

12:30

USD

Unemployment Claims

 

Aug 10

12:30

CAD

Employment Change

7.3K

 

12:30

CAD

Unemployment Rate

7.2%

 

12:30

USD

Import Prices m/m

-2.7%

 

18:00

USD

Federal Budget Balance

-59.7B

Upcoming Government Bond Auctions

Date Time Country 

Aug 06  09:10  Norway

Aug 07  00:30  Japan

Aug 07  09:15  Austria

Aug 07  14:30  UK

Aug 07  17:00  US

Aug 08  09:30  Germany

Aug 08  10:00  Norway

Aug 08  15:30  Italy

Aug 08  17:00  US

Aug 09  15:30  Italy

Aug 09  17:00  US

Aug 10  10:00  Belgium

Aug 13  09:10  Italy

Aug 13  09:10  Norway

Aug 13  09:30  Germany

Aug 14  09:10  Greece 

Aug 14  09:10  Italy

Aug 14  09:30  Belgium

Aug 14  14:30  UK

Aug 15  09:10  Sweden

Aug 16  09:30  UK

Aug 16  15:00  US

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About: FX Empire Analyst - Barry Norman

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