USD/CAD Weekly Fundamental Analysis September 24-28, 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 wrapped up Friday relatively unchanged, with commodities showing signs of price weakness. The loonie gained 0.01 of a cent to 102.42 cents US. November crude on the New York Mercantile Exchange moved up 48 cents to US$92.89 a barrel, meaning that the price of oil lost six per cent on the week. The December bullion contract increased $7.80 to end the week at US$1,778 an ounce. December copper was up three cents to US$3.79 a pound.

Date

Last

Open

High

Low

Change %

Sep 21, 2012

0.9764

0.9762

0.9780

0.9732

0.02%

Sep 20, 2012

0.9762

0.9752

0.9816

0.9750

0.10%

Sep 19, 2012

0.9752

0.9750

0.9764

0.9726

0.02%

Sep 18, 2012

0.9750

0.9747

0.9766

0.9731

0.03%

Sep 17, 2012

0.9747

0.9718

0.9760

0.9694

0.30%

A report from Statistics Canada showed that Canada’s inflation rate continued to slide in August, dipping one-tenth of a point to 1.2 per cent as most goods and services tracked by the agency fell or rose moderately compared with the same month last year.

This will be a big week for Canadian markets as we get further readings on how the economy is faring in Q3.  If our call for a decline in July’s monthly GDP print comes true on Friday, then GDP growth for the quarter as a whole could well come in slightly to either side of no growth over the prior quarter based upon what we know about the Q2 hand-off and assuming flat GDP readings in August and September.  If that happens, then growth would seriously under-shoot the BoC’s expectation for 2% GDP growth in Q3 which itself had been revised down from an earlier forecast of 2.4%.  For the quarter as a whole, the hits the country is taking to manufacturing, international trade and wholesale sales are sizeable enough to put downside risks to such relatively buoyant views.  On Tuesday, July retail sales land.  They will be used to firm up calls for monthly GDP later in the week so watch for revision risk following the initial consensus GDP call that is available now.

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 17-21, 2012 actual v. forecast for the Canadian & US Dollar

Date

Currency

Event

Actual

Forecast

Previous

Sep. 17

CAD

Foreign Securities Purchases 

6.67B

11.30B

-7.76B

 

USD

NY Empire State Manufacturing Index 

-10.4

-2.0

-5.8

Sep. 18

USD

Current Account 

-117.4B

-125.5B

-133.6B

 

USD

TIC Net Long-Term Transactions 

67.0B

45.3B

9.3B

Sep. 19

USD

Building Permits 

0.803M

0.796M

0.811M

 

USD

Housing Starts 

0.750M

0.765M

0.733M

 

USD

Existing Home Sales 

4.82M

4.55M

4.47M

Sep. 20

USD

Initial Jobless Claims 

382K

375K

385K

 

USD

Continuing Jobless Claims 

3272K

3300K

3304K

 

USD

Philadelphia Fed Manufacturing Index 

-1.9

-4.0

-7.1

Sep. 21

CAD

Core CPI (MoM) 

0.3%

0.3%

-0.1%

 

CAD

CPI (MoM) 

0.2%

0.4%

-0.1%

 

CAD

Wholesale Sales (MoM) 

-0.6%

-0.1%

-0.3%

 

CAD

CPI (YoY) 

1.2%

1.0%

1.3%

 

Economic Highlights of the coming week that affect the American and Canadian Markets.

Date

Time

Currency

Event

Forecast

Previous

Sep. 25 

13:30

CAD

Core Retail Sales (MoM) 

 

-0.4%

 

15:00

USD

CB Consumer Confidence 

63.0

60.6

Sep. 26 

15:00

USD

New Home Sales 

380K

372K

Sep. 28 

13:30

CAD

GDP (MoM) 

 

0.2%

Government Bond Auction

Date Time Country 

Sep 24 09:10 Norway 

Sep 24 09:30 Germany 

Sep 24 10:00 Belgium 

Sep 24 15:30 Italy  

Sep 25 08:30 Holland 

Sep 25 08:30 Spain 

Sep 25 09:10 Italy  

Sep 25 14:30 UK 

Sep 25 17:00 US 

Sep 26 09:10 Italy  

Sep 26 09:10 Sweden 

Sep 26 09:00 Germany 

Sep 26 14:30 Sweden 

Sep 26 17:00 US 

Sep 27 00:30 Japan 

Sep 27 09:10 Italy  

Sep 27 17:00 US

 

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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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