USD/CAD Forecast Dec. 23, 2011, Fundamental Analysis

The USD/CAD pair fell for the third day in a raw after the dollar dropped and stocks rose amid signs the economy is strengthening, as the US jobless claims dropped to the lowest level since April 2008 and US confidence came better than expected, together overshadowed slower than forecasted US GDP.

As the year nears to end, lights are about to fade upon the financial markets and we will accordingly see low volumes and limited trading as well before Christmas holiday. The sentiment will start to shape as investors stay cautious ahead of the New Year’s but traders will be mostly concerned about the latest development from the 17-bloc euro area.

The USD/CAD pair could strengthen if pessimism continues to dominate markets, but we still expect volatility to hold a grip for now, as uncertainty remains the main theme in markets, and that could also lead to deep fluctuations for the USD/CAD pair.

Thursday December 23:

Canada will release the latest GDP estimates for the month of November, where analysts suggest the economy grew at a slower pace in November.