USD/CAD Weekly Fundamental Analysis December 17-21, 2012, Forecast

Introduction: The Canadian Dollar moves in reaction to the US Dollar. Movements are small and easy to track and trade. The Canadian Dollar also responds to economic reports within Canada. It has little action against foreign currencies except during major moves or crisis.

The USD/CAD is the single biggest beneficiary of rising oil prices. Canada which is already the biggest exporter of oil to the US will experience a boost to its economy when oil price continue to increase. Therefore, if oil rises the Canadian dollar is likely to follow. Over the past years, the correlation between the Canadian dollar and oil prices has been approximately 81%. 

Weekly Analysis and Recommendation:

The USD/CAD is trading at 0.9858 trading in a tight range this week between 0.9862 and 0.9833. This will be an active week for the Looney as government offices will be closing until Jan 4^th so all data will be dumped this week ahead of the holiday closure. The US dollar remains weak with additional stimulus and the quickly arriving US fiscal cliff. US economic data has a stronger effect on the Looney that it does on the US dollar as the economy is so dependent on the US for imports and jobs.

October GDP (December 21) is looking soft based on the limited data available. Traders are expecting a -0.1% m/m print on the basis of a decline in housing starts, a -2.4% m/m decline in manufacturing shipment volumes, and weakness in natural resources export volumes (the latter point to the possibility of a 6th consecutive monthly decline in mining, oil, and gas extraction). The rushed holiday schedule means that retail sales and wholesale sales — key ingredients in our GDP forecast — will be released during the same week as the GDP number leading to substantial forecast revision risk. 

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.

Major Economic Events for the week of December 10-14 actual v. forecast for the Canadian & US Dollar

Historical: From 2010 to present

Highest: 1.0853 CAD on May 25, 2010.

Average: 1.0090 CAD over this period.

Lowest: 0.9407  CAD on Jan 26, 2011.

 

Economic Highlights of the coming week that affect the American and Canadian Markets