USD/CAD Weekly Fundamental Analysis July 2-6, 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 ended the week on a strong note, moving up from 1.0336 on Thursday to close at 1.0167. After the USD tumbled on Friday as investors moved to more risk, on positive information from the EU Summit and above expected GDP. On Friday the CAD was strengthened when the GDP reported at 0.3% when forecast at 0.2%.

Date

Last

Open

High

Low

Change %

Jun 29, 2012

1.0167

1.0336

1.0340

1.0166

-1.64%

Jun 28, 2012

1.0336

1.0252

1.0362

1.0232

0.82%

Jun 27, 2012

1.0252

1.0243

1.0268

1.0238

0.09%

Jun 26, 2012

1.0243

1.0289

1.0297

1.0234

-0.45%

Jun 25, 2012

1.0289

1.0267

1.0318

1.0257

0.21%

Canadian markets will start the week closed on Monday for the national Canada Day holiday that unofficially kicks off the short Canadian summer.  They will then spend much of the rest of the week catching up to global events and then continuing to be driven by developments elsewhere at least until Friday when the June jobs report lands.  After heaping on the strongest back-to-back monthly gains in March and April since 1981, job growth fell back to 7.7k in May and only because of a rise in self-reported self-employment within the household survey.  Strip that effect out, and the country lost jobs which leaves us with a conundrum. 

 Weakness from last Fall onward and then renewed weakness in May would suggest as much and perhaps owe itself to a variety of distorting influences to job growth that we’ve noted in the past.  What also mitigates the enthusiasm into spring is the fact that two months worth of strong job growth pale in comparison to the fact that inflation-adjusted wage growth is non-existent in Canada such that 17 million workers are, on average, earning nothing extra beyond increases in the cost of living.  Two of the reasons for this might be continued job market slack with an unemployment rate of 7.3% that is higher yet after counting part-time workers who would rather be working full time, and public sector wage moderation as some come under closer fiscal scrutiny

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 June 25 – 29 actual v. forecast for the Canadian & US Dollar 

Date

Currency

 Event

Actual

Forecast

Previous

Jun 25

USD

New Home Sales

369K

347K

343K

Jun 26

USD

S&P/CS Composite-20 HPI y/y

-1.9%

-2.4%

-2.6%

USD

CB Consumer Confidence

62.0

63.8

64.4

Jun 27

USD

Core Durable Goods Orders m/m

0.4%

0.9%

-0.6%

USD

Durable Goods Orders m/m

1.1%

0.5%

-0.2%

USD

Pending Home Sales m/m

5.9%

1.2%

-5.5%

USD

Crude Oil Inventories

-0.1M

-0.5M

2.9M

Jun 28

USD

Unemployment Claims

386K

385K

392K

USD

Final GDP q/q

1.9%

1.9%

1.9%

Jun 29

CAD

GDP m/m

0.3%

0.2%

0.1%

CAD

RMPI m/m

-1.0%

-1.3%

-2.0%

USD

Core PCE Price Index m/m

0.1%

0.2%

0.1%

USD

Personal Spending m/m

0.0%

0.1%

0.1%

USD

Chicago PMI

52.9

52.8

52.7

USD

Revised UoM Consumer Sentiment

73.2

74.2

74.1

 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

Forecast

Previous

Jul 2

10:00am

USD

ISM Manufacturing PMI

52.1

53.5

Jul 3

10:00am

USD

Factory Orders m/m

0.1%

-0.6%

Jul 5

8:15am

USD

ADP Non-Farm Employment Change

101K

133K

8:30am

USD

Unemployment Claims

385K

386K

10:00am

USD

ISM Non-Manufacturing PMI

53.1

53.7

11:00am

USD

Crude Oil Inventories

 

-0.1M

Jul 6

8:30am

CAD

Building Permits m/m

-0.7%

-5.2%

8:30am

CAD

Employment Change

5.2K

7.7K

8:30am

CAD

Unemployment Rate

7.3%

7.3%

8:30am

USD

Non-Farm Employment Change

92K

69K

8:30am

USD

Unemployment Rate

8.2%

8.2%

10:00am

CAD

Ivey PMI

55.1

60.5

 

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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

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