USD/CAD Fundamental Forecast – January 21, 2016

Analysis and Recommendations:

The USD/CAD gained 65 points after crude oil tumbled farther leaving the Loonie with no support. The USDCAD is trading at 1.4644 its highest level in months.  The loonie is an untamable beast at the moment and the BOC decision is going to bring even more volatility. Right now this is probably a currency that inexperienced traders want to give a wide berth to. For me there’s only one scenario that I’d maybe look to trade, and that’s any decision or comments that send USDCAD lower, against the trend.

Almost irrespective of the policy decision that the Bank of Canada makes this afternoon, the current heightened levels of uncertainty about the direction of policy argues the case of a step up in the forward guidance offered by the Bank.

Since market speculation about the outcome of today’s policy meeting is split, there is risk that the announcement will have a heavy impact on the CAD. By expressing a very dovish bias the BoC could potentially limit CAD gains on any decision to leave rates on hold. Alternatively, guidance could nip in the bud any speculation that a rate cut today could lead to further moves later in the year.

The CAD was the weakest performing G10 currency during 2015 and the economy has the additional benefit of some modest fiscal stimulus in the pipeline. Additionally, the Bank has pointed to the highly leveraged household sector as having created vulnerabilities for the economy. Although macro-prudential measures are in place, the BoC would risk further exacerbating household debt levels by cutting rates further.

FxEmpire provides in-depth analysis for each asset 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 up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

 

Upcoming Economic Events that you should be monitoring:

Thursday January 21, 2016

Government Bond Auctions

Date Time and Country

Jan 21 10:30 Spain Auctions Bonos/Obligaciones

Jan 21 10:50 France Holds bond auction

Jan 21 19:00 US Holds 10-year TIPS auction

Jan 21 17:20 Italy Details of CTZ/linker auction on Jan 28

Jan 21 17:20 Sweden Details of I/L auction on 28 Jan

Jan 21 n/a US Details of 2-yr note auction on Jan 26

Jan 25 11:30 Germany EUR 1.5bn Jan 2017 Bubill

Jan 25 13:00 Norway Details of bond auction on Jan 27

Jan 25 17:20 Italy Details of BTP/CCTeus on 28 Jan

Jan 26 11:10 Italy Holds CTZ/linker bond auction

Jan 26 n/a US Holds 2-year note auction

Jan 27 11:05 Norway Holds bond auction

Jan 27 11:30 Germany EUR 1bn 2.5% Aug 2046 Bund

Jan 27 17:20 Sweden Details of bond auction on 03 Feb

Jan 27 n/a US Holds 2-year FRN auction

Jan 27 n/a US Holds 5-year note auction

Jan 28 11:03 Sweden Holds I/L bond auction

Jan 28 11:10 Italy Holds BTP/CCTeus auction

Jan 28 n/a US Holds 7-year note auction

Feb 02 n/a UK Details of Gilt auctions on Feb 09 & 11