USD/CAD Weekly Fundamental Analysis July 16-20, 2012, Forecast

Get Forex buy/sell signals directly to your email and by SMS.
To learn more click here

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 down trading at 1.0138. The USD was strong all week as risk aversion remained the theme. Domestic data has been relatively strong and risk aversion, as measured by either the VIX or currency volatility, remains low, typically positive for CAD. In addition, the outlook for the US, somewhat compromised by a weak ISM and employment report but on a relative basis still brighter than many has helped not just CAD, which has outperformed since the beginning of July. Yesterday’s new two-year USD index (DXY) high was important for several reasons, but one of the most important for FX valuation was that it was not driven by a sudden spike in risk aversion, but instead relative fundamentals

Date

Last

Open

High

Low

Change %

Jul 13, 2012

1.0138

1.0201

1.0204

1.0130

-0.62%

Jul 12, 2012

1.0201

1.0193

1.0250

1.0177

0.08%

Jul 11, 2012

1.0193

1.0224

1.0231

1.0173

-0.30%

Jul 10, 2012

1.0224

1.0194

1.0230

1.0166

0.30%

Jul 09, 2012

1.0193

1.0198

1.0221

1.0184

-0.05%

Canadian markets will be heavily focused upon the Bank of Canada’s latest interest rate statement (Tuesday) and the Monetary Policy Report (Wednesday).  After a strongly dovish bias since last Fall, the BoC then went abruptly more hawkish in April and bought into the view that the US outlook had improved and that markets were on sounder footings back then.  Since then growth in the US and Canada has disappointed BoC expectations.  The BoC’s last full set of forecasts in the April MPR expected Q1 Canadian GDP to come in at 2.5% q/q annualized growth and instead 1.9% was delivered with a full percentage point of that being driven by inventory building that characterized a moribund ex-inventory growth rate

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 July 9 – 13 actual v. forecast for the Canadian & US Dollar

Date

Currency

 Event

Actual

Forecast

Previous

Jul 10

CAD

Housing Starts

223K

203K

217K

Jul 11

CAD

Trade Balance

-0.8B

-0.5B

-0.6B

USD

Trade Balance

-48.7B

-48.5B

-50.6B

USD

Crude Oil Inventories

-4.7M

-1.3M

-4.3M

Jul 12

CAD

NHPI m/m

0.3%

0.2%

0.2%

USD

Unemployment Claims

350K

376K

376K

USD

Import Prices m/m

-2.7%

-1.5%

-1.2%

USD

Federal Budget Balance

-59.7B

-91.7B

-124.6B

Jul 13

USD

PPI m/m

0.1%

-0.5%

-1.0%

USD

Core PPI m/m

0.2%

0.3%

0.2%

USD

Prelim UoM Consumer Sentiment

72.0

73.5

73.2

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 Canadian and American Markets

Date

Time

Currency

 Event

Previous

Jul 16

12:30

CAD

Foreign Securities Purchases

10.20B

12:30

USD

Retail Sales m/m

-0.2%

12:30

USD

Empire State Manufacturing Index

2.3

14:00

USD

Business Inventories m/m

0.4%

Jul 17

9:15

ALL

G7 Meetings

 

12:30

CAD

Manufacturing Sales m/m

-0.8%

12:30

USD

CPI m/m

-0.3%

13:00

CAD

BOC Rate Statement

 

13:00

CAD

Overnight Rate

1.00%

13:00

USD

TIC Long-Term Purchases

25.6B

13:15

USD

Industrial Production m/m

-0.1%

Jul 18

12:30

USD

Building Permits

0.78M

12:30

USD

Housing Starts

0.71M

14:30

CAD

BOC Monetary Policy Report

 

14:30

USD

Crude Oil Inventories

-4.7M

15:15

CAD

BOC Press Conference

 

Jul 19

12:30

CAD

Wholesale Sales m/m

1.5%

12:30

USD

Unemployment Claims

 

14:00

USD

Existing Home Sales

4.55M

14:00

USD

Philly Fed Manufacturing Index

-16.6

Jul 20

12:30

CAD

CPI m/m

-0.1%

 

Want to read more articles like this one?
Enter your e-mail address and read FX Empire content directly from your inbox.
 
We value your privacy. Your e-mail address will not be shared.
About:FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

  View all of FX Empire Analyst - Barry Norman's Articles    
Share Your Thoughts: Post a Comment


Your email address will not be published.