USD/CAD Weekly Fundamental Analysis, August 3 – August 7, 2015 Forecast

Weekly Analysis and Recommendations:

The USD/CAD finished in a strong position last week on the bullish side of the March 20, 2009 top at 1.3062. A sustained move over this level is likely to create enough upside momentum to challenge the next key target at 1.3500. Falling back below this level will likely mean that investors are looking for value and would rather play the long side after a near-term correction. 

The catalyst behind last week’s rally was lower oil prices. Crude oil reached a new low for the year before short-covering triggered a slight rebound rally. U.S. inventories declined, but the rig count went up. Crude oil could see more selling pressure next week based on the weak close. This would underpin the USD/CAD. 

Another factor favoring the U.S. Dollar over the Canadian Dollar is economic growth. Second quarter U.S. GDP showed 2.3% growth while the Canadian economy hovers on the brink of a recession. 

The interest rate differential and the divergence between the Fed and Bank of Canada monetary policies also favor the U.S. Dollar. Simply stated, the Fed is considering an interest rate hike as early as September and the Bank of Canada may cut rates again before the end of the year. 

Traders are likely to react to this week’s release of the latest U.S. Non-Farm Payrolls report on Friday, August 7. The report is expected to show the economy added 224K new jobs in July. The Fed is putting a lot of emphasis on the labor market in its rate hike decision process. If the number of new jobs added is substantially above the estimate then the USD/CAD will soar. If the number is below the estimate then look for increased volatility and lower prices because this will create uncertainty about a September rate hike. 

FxEmpire provides in-depth analysis for each currency and commodity 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 recent analysis and information in our weekly reports and we provide daily updates and outlooks. 

Reports to Watch This Week:

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