USD/CAD Weekly Fundamental Analysis August 27-31, 2012 Forecast

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 closed the week at 0.9922 as parity continues to draw near. As Canada keeps surprising markets with negative eco data, the Looney continues to decline. Wholesale Sales were down and retail sales tumbled in Canada. While US numbers were much better. The dollar fell against most of its trading partners with the possibility of stimulus from the Feds. The Loonie was so weak it was not able to capitalize on these moves.

How has Canada weathered the global slump of mid-2012? GDP for Q2 will be released on August 31 along with the monthly GDP data for June. Scotia is expecting a flat 0% m/m GDP outcome which would translate into a 1.4% q/q GDP print after accounting for fairly weak growth during April and May. It may come as a surprise, but even muted 1.4% GDP growth would put Canadian GDP on the high end of the range of global developed countries during Q2, better than major European economies but slightly below the U.S.). That’s not to say that the economy is firing on all cylinders.

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 up to the data analysis and information in our weekly reports.

Major Economic Events for the week of August 20-24, 2012 actual v. forecast for the Canadian & US Dollar

Historical:

Highest: 1.0842 CAD on Nov 01, 2009.

Average: 1.0147 CAD over this period.

Lowest: 0.9407  CAD on Jan 26, 2011. 

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

Government Bond Auctions

Date  Time  Country 

27/8  11:30  Germany 

28/8  10:30  Spain

28/8  11:00  Italy 

28/8  19:00  US 

29/8  11:00  Italy 

29/8  19:00  US 

30/8  05:35  Japan

30/8  11:00  Italy 

30/8  19:00  US