USD/CAD Fundamental Forecast – September 15, 2016

The USD/CAD posted a two-sided trade on Wednesday, first surging to 1.3208 before pulling back to 1.3174, down 0.0001 or -0.01%. The early rally took the Forex pair to its highest level since July 27 when it topped out at 1.3252.

The Canadian Dollar fell to a nearly six-week low against the U.S. currency after a steep drop in oil prices and on lower demand for risky assets. Traders were also reacting to the recent rise in bond yields. This was fueled by worries over whether the major central banks have the ability to further stimulate growth. It also meant that investors were shifting into a risk-off mode. Rising bond yields tend to weigh on higher-yielding commodity-linked currencies such as the Canadian Dollar.

Crude oil prices fell on Wednesday despite data from the U.S. Energy Information Administration showing a draw down in crude oil stocks while investors were looking for a build. A huge rise in distillate inventories offset any benefit from the crude oil draw down.

Technical factors may have contributed to the sell-off late in the session, but this is expected to be short-lived. The key elements to watch at this time are the bond yields and the direction of crude prices. The Canadian Dollar will face two major headwinds if yields continue to rise and crude oil prices continue to fall. The fallout from these two events could create the momentum needed to drive the USD/CAD through its July top at 1.3252.

With the trend decisively higher and the fundamentals better for the U.S. Dollar, the strategy at this time is look for entry points on pullbacks. The longer-term weekly chart also indicates that a serious shift in investor sentiment may be taking place. It will be confirmed if 1.3252 is taken out with conviction.

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.

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Thursday, September 15, 2016

Government Bond Auctions

Date/Time Country Type

Sep 14 11:05 Norway Holds bond auction

Sep 14 11:30 UK 0.125% 2046 I/L Gilt

Sep 14 11:30 Germany Eur 1bn 2.5% Jul 2044 Bund

Sep 15 10:30 Spain Holds bond auction

Sep 15 11:03 Sweden Holds I/L bond auction

Sep 15 11:50 France Holds bond auction