USD/CAD Weekly Fundamental Analysis, August 31 – September 4, 2015 Forecast

Weekly Analysis and Recommendations:

Despite the surge in crude oil prices last week, the USD/CAD still managed to close higher for the week. This came as a disappointment to some traders who thought that the Canadian Dollar would’ve showed a better response to a 10%+ gain in crude oil prices in one week. 

If crude oil continues to rally this week, we could see a better reaction to the downside by the USD/CAD, but the primary driver will likely be the slew of economic data. The inability to break the USD/CAD after oil prices soared likely means that investors are putting little faith in the economy pulling out its current near-recession without some help from the central bank. 

Pressuring the Canadian Dollar could be another possible interest rate cut by the Bank of Canada. This will likely be decided by this week’s Canadian GDP data and employment report. 

The GDP report is expected to show growth of 0.2%. The previous report showed a reading of -0.2%. The Employment Change report is expected to show the economy added 2000 new jobs. The unemployment rate is expected to remain unchanged at 6.8%, however, labor productivity is expected to show a rise from -0.1% to 0.1%. 

The USD/CAD could be supported by positive U.S. economic data this week. Early in the week, the key reports are ISM Manufacturing PMI and Factory Orders. Friday’s U.S. Non-Farm Payrolls report is most important because this report will help the Fed decide whether to raise rates early in September or wait until the end of the year. 

There are some who believe the recent turbulence in the financial markets, because of the problems in China, will likely mean the Fed will refrain from an early rate hike. But it is going to take another sharp rise in crude oil prices combined with strong Canadian GDP and employment data to pressure the USD/CAD unless the U.S. jobs data completely disappoints. 

Don’t be surprised if there is weakness in the USD/CAD market because of a delayed reaction to the crude oil data, but with so many investors waiting for another rate cut by the Bank of Canada, any weakness is likely to be short-lived. 

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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