USD/CAD Forecast Dec. 02, 2011, Fundamental Analysis

The USD/CAD pair extended its losses on Thursday, as the U.S. dollar remained weak after major central banks around the globe announced a joint effort to boost liquidity within the financial system, which supported confidence and boosted demand for higher yielding assets Including the Canadian dollar, which pushed the USD/CAD pair further to the downside.

Nonetheless, the losses were limited on Thursday after the jobless claims rose unexpectedly last week worse than median estimates, as jobless claims rose to 402K, compared with median estimates of 390K. Yet, the Canadian dollar received some bullish momentum after the U.S. ISM manufacturing index expanded in November to 52.7, better than median estimates of 51.8, which boosted risk appetite in markets and supported demand for higher yielding assets.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where rising yields in Europe, especially in Italy suggest investors are concerned amid the uncertainty that is surrounding the outlook of the EU debt crisis, especially since investors are still skeptic even after EU finance ministers agreed to increase the firepower of the EFSF, and proposed expanding the funding for the IMF to help countries in Europe to withstand the debt crisis.

Traders will be eyeing the jobs report on Friday, where the nonfarm payrolls are expected to rise by 125,000 jobs in November, while unemployment is expected to remain unchanged at 9.0%. We should expect markets to turn their attention to the jobs report, since it will provide a better picture over the recent developments in the world’s largest economy.

Also, traders will be eyeing the jobs report from Canada, which is expected to show that Canadian employers added 11.0K jobs in November, compared with 54.0K jobs lost back in October, while unemployment is expected to remain unchanged at 7.3%.

The USD/CAD pair should still be able to extend its losses if the current wave of optimism continues to dominate markets, but we still expect volatility to continue to dominate trading, as uncertainty remains the dominant theme in markets, and that could also lead to high levels of fluctuations for the USD/CAD pair.

Friday December 02:

Canada will release the jobs report for November at 12:00 GMT, where the unemployment rate is expected to remain unchanged at 7.3%, while the net change in employment is expected to show that 20.0K jobs were added, compared with the prior 54.0K lost jobs in October.

The United States will join the session at 13:30 GMT with the closely watched jobs report for November, where the public sector could have added 125 thousand jobs to the economy compared with the previous addition of 80 thousand jobs in October, while the unemployment rate is expected to linger at 9.0%.