USD/CAD Weekly Fundamental Analysis September 17-21, 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 at 0.9716 not far off the opening earlier in the week at 0.9769. The CAD although gaining for the week was unable to capitalize on the weakness in the USD and the increase in crude oil prices. The pair opened on Monday at 0.9784.

The Canadian dollar closed lower Friday after the U.S. Federal Reserve unveiled a third round of economic stimulus to help a weak economy. The loonie was down 0.3 of a cent to 102.97 cents US after the U.S. central bank said it will spend $40 billion a month on a new round of bond purchases and will continue to do so until the job market shows substantial improvement.

The money will be spent on mortgage backed securities to keep interest rates low, encourage lending and support the slow recovery of the housing sector. The loonie had been up more than half a cent earlier Friday morning but moved lower amid soft manufacturing data while traders took some profits from a substantial gain.

The loonie surged more than two cents over the past seven sessions as the European Central Bank announced a plan to purchase government bonds in order to keep eurozone borrowing costs under control and speculation mounted the Fed would act to support a slowing economy.

Central bank policy, namely by the ECB and Fed, have put significant downward pressure on the U.S. dollar.

Date

Last

Open

High

Low

Change %

Sep 14, 2012

0.9716

0.9684

0.9722

0.9633

0.32%

Sep 13, 2012

0.9685

0.9762

0.9774

0.9666

-0.78%

Sep 12, 2012

0.9761

0.9736

0.9768

0.9716

0.26%

Sep 11, 2012

0.9736

0.9769

0.9774

0.9714

-0.34%

Sep 10, 2012

0.9769

0.9784

0.9789

0.9755

-0.15%

Canadian housing markets will be front and centre by way of domestic attention next week when resale figures for the month of August arrive on Monday.  We already know some of the regional results, and for the second month in a row they are not pretty for Vancouver and Toronto.  Sales are 30.7% lower in y/y terms in Vancouver, and fell 21.4% m/m in August over July.  August’s sales were 39% below the last ten years’ average for the month of August.  Listings climbed 13.8% y/y but slipped by about 3% m/m.  The combined results have pushed the sales to listings ratio to 9% which is a full ten points lower than in March when this ratio peaked.  Higher inventory imbalances pose significant downside risks to Vancouver house prices going forward.  The news was not that much better in Toronto where Augusts’ sales were 12.5% lower compared to August 2011.  Toronto’s new listings, however, fell 5.5% y/y although the stock of active listings is up 10.5% y/y.  Across home categories, condo sales were 22% lower y/y, detached home sales were 10% lower and semi-detached homes were 13% lower.  Townhomes were flat.  It’s possible that for the second month in a row, the weakness in Canada’s two largest cities may be offset by strengths elsewhere. Canadian CPI will also attract attention on Friday.

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 September 10-14, 2012 actual v. forecast for the Canadian & US Dollar

Date

Time

Currency

Event

Actual

Forecast

Previous

 Sep.11

13:15

CAD

Housing Starts 

224.9K

200.0K 

208.0K 

 

13:30

CAD

Trade Balance 

-2.3B

-1.0B 

-1.9B 

 

13:30

USD

Trade Balance 

-42.0B

-44.0B 

-41.9B 

 Sep. 12

13:30

USD

Import Price Index (MoM) 

0.7%

1.4% 

-0.7% 

 

18:00

USD

10-Year Note Auction 

1.764%

 

1.680% 

 Sep. 13

13:30

USD

Core PPI (MoM) 

0.2%

0.2% 

0.4% 

 

13:30

USD

PPI (MoM) 

1.7%

1.1% 

0.3% 

 

13:30

USD

Initial Jobless Claims 

382K

370K 

367K 

 

13:30

USD

Continuing Jobless Claims 

3283K

3318K 

3332K 

 

13:30

USD

PPI (YoY) 

2.0%

1.4% 

0.5% 

 

13:30

USD

Core PPI (YoY) 

2.5%

2.6% 

2.5% 

 

17:30

USD

Interest Rate Decision 

0.25%

0.25% 

0.25% 

 

19:00

USD

Federal Budget Balance 

-191.0B

-155.0B 

-69.6B 

 Sep. 14

13:30

USD

Core CPI (MoM) 

0.1%

0.2% 

0.1% 

 

13:30

USD

Core Retail Sales (MoM) 

0.8%

0.6% 

0.8% 

 

13:30

USD

CPI (MoM) 

0.6%

0.5% 

0.0% 

 

13:30

CAD

Manufacturing Sales (MoM) 

-1.50%

1.00% 

-0.80% 

 

13:30

USD

Retail Sales (MoM) 

0.9%

0.7% 

0.6% 

 

13:30

USD

CPI (YoY) 

1.7%

1.7% 

1.4% 

 

13:30

USD

Core CPI (YoY) 

1.9%

2.0% 

2.1% 

 

14:15

USD

Industrial Production (MoM) 

-1.2%

0.2% 

0.5% 

 

14:55

USD

Michigan Consumer Sentiment 

79.2

74.0 

74.3 

Historical: From 2010 to present

Highest: 1.0853 CAD on May 25, 2010.

Average: 1.0090 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.

Date

Time

Currency

Event

Forecast

Previous

Sep. 17 

13:30

CAD

Foreign Securities Purchases 

 

-7.89B 

 

13:30

USD

NY Empire State Manufacturing Index 

-2.0 

-5.8 

 Sep. 18

13:30

USD

Current Account 

-126.0B 

-137.3B 

 

14:00

USD

TIC Net Long-Term Transactions 

 

9.3B 

Sep. 19 

13:30

USD

Building Permits 

0.800M 

0.811M 

 

13:30

USD

Housing Starts 

0.765M 

0.746M 

 

15:00

USD

Existing Home Sales 

4.56M 

4.47M 

Sep. 21

13:30

CAD

Core CPI (MoM) 

 

-0.1% 

 

13:30

CAD

CPI (MoM) 

 

-0.1% 

 

13:30

CAD

Wholesale Sales (MoM) 

 

-0.1% 

 

13:30

CAD

CPI (YoY) 

1.0% 

1.3% 

Government Bond Auction

Date Time Country 

Sep 17 09:10 Slovakia

Sep 17 10:00 Norway 

Sep 18 08:30 Spain 

Sep 18 09:10 Greece 

Sep 18 09:30 Belgium 

Sep 19 09:10 Sweden 

Sep 19 09:30 Germany 

Sep 19 09:30 Portugal 

Sep 19 10:00 Norway 

Sep 20 08:30 Spain 

Sep 20 08:50 France 

Sep 20 09:30 UK 

Sep 20 09:50 France 

Sep 20 15:00 US 

Sep 20 17:00 US 

Sep 21 15:30 Italy  

 

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About: FX Empire Analyst - Barry Norman

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