USD/CAD Weekly Fundamental Analysis July 9-13, 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 a bit higher then it began with the USD trumping its trading partners, as risk aversion and Fed dreams returned to the markets. Although risk aversion is no longer focused primarily on the eurozone, but on the global economy. The CAD has had a lot of negative eco data holding it back while the USD and the DX continued to climb. Oil remains a prime weakness on the CAD. The CAD ended the week at 1.0195

Date

Last

Open

High

Low

Change %

Jul 06, 2012

1.0195

1.0144

1.0208

1.0140

0.50%

Jul 05, 2012

1.0144

1.0135

1.0157

1.0101

0.08%

Jul 04, 2012

1.0136

1.0122

1.0142

1.0121

0.14%

Jul 03, 2012

1.0122

1.0172

1.0173

1.0121

-0.49%

Jul 02, 2012

1.0172

1.0180

1.0201

1.0156

-0.07%

Canada’s economic prospects are also being challenged by both international and domestic factors. The softening in the demand and prices for key commodities is restraining export earnings and, if sustained, would have a more discernible impact on longer-term investments, though the pipeline for resource-related infrastructure projects remains quite full. Until there is a greater diversification in exports to the developing regions of the world, the country’s growth potential remains constrained by the tepid U.S. performance and recession in Europe. Domestic fortunes are still relatively good, bolstered by continuing job gains. Looking ahead, however, the combination of ongoing federal and provincial fiscal restraint alongside Ottawa’s additional measures to regulate mortgage lending and slow the pace of household indebtedness will gradually constrain residential activity and consumer spending. No aspect of the Canadian economy has received more press in 2012 than the housing sector, so Canadian housing starts data for June are likely to receive a fair bit of attention when they’re released on July 10.

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 2 – 6 actual v. forecast for the Canadian & US Dollar

Date

Currency

 Event

Actual

Forecast

Previous

Jul 2

USD

ISM Manufacturing PMI

49.7

52.1

53.5

Jul 3

USD

Factory Orders m/m

0.7%

0.1%

-0.7%

Jul 5

USD

ADP Non-Farm Employment Change

176K

103K

136K

USD

Unemployment Claims

374K

385K

388K

USD

ISM Non-Manufacturing PMI

52.1

53.1

53.7

USD

Crude Oil Inventories

-4.3M

-1.6M

-0.1M

Jul 6

CAD

Building Permits m/m

7.4%

0.7%

-4.4%

CAD

Employment Change

7.3K

5.1K

7.7K

CAD

Unemployment Rate

7.2%

7.3%

7.3%

USD

Non-Farm Employment Change

80K

97K

77K

USD

Unemployment Rate

8.2%

8.2%

8.2%

USD

Average Hourly Earnings m/m

0.3%

0.2%

0.2%

CAD

Ivey PMI

49.0

55.4

60.5

 

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 9

14:30

CAD

BOC Business Outlook Survey

 

Jul 10

12:15

CAD

Housing Starts

211K

Jul 11

12:30

CAD

Trade Balance

-0.4B

12:30

USD

Trade Balance

-50.1B

14:30

USD

Crude Oil Inventories

-4.3M

Jul 12

12:30

CAD

NHPI m/m

0.2%

12:30

USD

Unemployment Claims

 

12:30

USD

Import Prices m/m

-1.0%

18:00

USD

Federal Budget Balance

-124.6B

Jul 13

12:30

USD

PPI m/m

-1.0%

13:55

USD

Prelim UoM Consumer Sentiment

73.2

 

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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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