USD/CAD Weekly Fundamental Analysis July 23-27, 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 opened the week at 1.0140 and closed the week at 1.0128 as the CAD gained momentum over the USD. Canada benefited from the rise in oil prices and over speculation the BoC is getting closer to reducing interest rates again. The US was weak most of the week on comments from Fed Chairman Bernanke during his testimony before Congress. He dashed hope of additional stimulus and painted a bleak view of the US economy, but saw a glimmer of hope and a bit of growth and forward movement.

His prime worry was ongoing problems in the EU and negative eco data from China which could hurt the US’s fragile recovery.

Date

Last

Open

High

Low

Change %

Jul 20, 2012

1.0128

1.0078

1.0131

1.0070

0.50%

Jul 19, 2012

1.0078

1.0100

1.0107

1.0067

-0.22%

Jul 18, 2012

1.0100

1.0120

1.0149

1.0097

-0.20%

Jul 17, 2012

1.0120

1.0151

1.0170

1.0119

-0.31%

Jul 16, 2012

1.0151

1.0140

1.0173

1.0140

0.11%

Canadian markets will be relatively quiet by way of domestic developments next week, and will otherwise follow the broad global tone.  There could be one exception.  Canada releases retail sales for the month of May on Tuesday. Economists are expecting a solid gain in headline sales given a rise in auto sales and strength at large retailers, but this would only largely negate the contraction in sales that occurred over the prior month if it comes true.  Retail sales are also important because they are the last major indicator we’ll be using to round out our May GDP call in advance of the following week’s release.  Canada also releases the Teranet repeat sales indicator for house prices on Wednesday, and the country auctions 10s on Wednesday

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 16 – 20 actual v. forecast for the Canadian & US Dollar

Date

Currency

Event 

Actual

Forecast

Previous

Jul 16

CAD

Foreign Securities Purchases

26.11B

13.51B

10.16B

 

USD

Core Retail Sales m/m

-0.4%

0.1%

-0.4%

 

USD

Empire State Manufacturing Index

7.4

3.9

2.3

 

USD

Business Inventories m/m

0.3%

0.2%

0.3%

Jul 17

CAD

Manufacturing Sales m/m

-0.4%

0.7%

-1.1%

 

USD

Core CPI m/m

0.2%

0.2%

0.2%

 

USD

TIC Long-Term Purchases

55.0B

45.7B

27.2B

 

CAD

Overnight Rate

1.00%

1.00%

1.00%

 

USD

Capacity Utilization Rate

78.9%

79.2%

78.7%

 

USD

Industrial Production m/m

0.4%

0.4%

-0.2%

Jul 18

USD

Building Permits

0.76M

0.77M

0.78M

 

USD

Housing Starts

0.76M

0.74M

0.71M

 

USD

Crude Oil Inventories

-0.8M

0.5M

-4.7M

Jul 19

CAD

Wholesale Sales m/m

0.9%

0.2%

1.2%

 

USD

Unemployment Claims

386K

367K

352K

 

USD

Existing Home Sales

4.37M

4.64M

4.62M

 

USD

Philly Fed Manufacturing Index

-12.9

-7.9

-16.6

Jul 20

CAD

Core CPI m/m

-0.4%

-0.1%

0.2%

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 & American Markets

Date

Time

Currency

 Event

Previous

Jul 24

12:30

CAD

Core Retail Sales m/m

-0.3%

12:30

CAD

Retail Sales m/m

-0.5%

13:00

USD

Flash Manufacturing PMI

52.5

Jul 25

14:00

USD

New Home Sales

369K

14:30

USD

Crude Oil Inventories

 

Jul 26

12:30

USD

Core Durable Goods Orders m/m

0.7%

12:30

USD

Unemployment Claims

 

14:00

USD

Pending Home Sales m/m

5.9%

Jul 27

12:30

USD

Advance GDP q/q

1.9%

13:55

USD

Revised UoM Consumer Sentiment

72.0

 

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About: FX Empire Analyst - Barry Norman

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