USD/CAD Forecast Dec. 29, 2011, Fundamental Analysis

The USD/CAD pair rose amid lack of key economic report from the U.S economy, as debt crisis risks were highlighted after the European Central Bank’s balance sheet rose to a record 2.73 trillion euros since it offered three-year loans to financial institutions last week, replacing optimism on Italy’s 9 billion euros of 179-day bills sold at an debt auction today.

No major data was released from US, Euro Zone or UK on Wednesday, so traders were somehow clueless over the economic recovery. Thereby, European and American equities retreated after the Central Bank’s balance sheet was released.

Traders switched on the holiday mode with the year’s trading nearly complete, so trading volumes ebb down and market movement is pretty stuck within a tight range before the New Year’s holiday, yet with slight punch of cautious optimism. Sentiments will start to shape as investors remain cautious ahead of the New Year’s holiday but traders will be mostly concerned about the latest development from the 17-bloc euro area.

The USD/CAD pair could still rise if pessimism continues to dominate markets, but we still expect volatility to hold the steer 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 29:

No economic data will be released from Canada so eyes will still focused on Europe and the crises that could cause any change in trading amid the last week.