USD/CAD Weekly Fundamental Analysis, January 7-11, 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 opened the week at 0.9945 and closed at 0.9874 trading in a fairly tight range during the holiday week, that was more focused on the negotiations in Washington to avoid the fiscal cliff. With the CAD so tied to the US economy, that the two seemed to move in conjunction to each other.

The Canadian dollar posted its biggest gain versus its U.S. counterpart in almost five months as employers in December added almost twice the number of jobs forecast, lending weight to the government’s view that business investment will fuel an economic rebound.

The currency ended the week higher versus the majority of its 16 most-traded peers after a report yesterday showed Canada’s unemployment rate unexpectedly fell to a four-year low in December and hiring rose for a fifth month. Policy makers project employers to lead the nation out of a slump that slowed annualized growth to 0.6 percent in the third quarter. 

The loonie rose as payrolls in the U.S., Canada’s largest trade partner, climbed by 155,000 workers last month, following a revised 161,000 advance in November that was more than initially estimated, the Labor Department said in Washington. The median estimate of 82 economists surveyed by Bloomberg called for an increase of 152,000. The U.S. unemployment rate was higher than forecast at 7.8 percent.

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 31 – January 4 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

Upcoming Government Bond

Date Time Country 

Tuesday, January 10: Austria will auction €1.3 billion ($1.7 billion) in 5- and 10-year bonds

Thursday, January 12: Spanish 3- and 5-year bond auction

Friday, January 13: Italy will auction medium-long term bonds

Thursday, January 19: France will auction 5-year bonds

Thursday, January 19: Spanish 10-, 15-, and 30-year bond auction

Thursday, January 26: Italian long-term bond auction

Monday, January 30: Italian medium-long term bond auction

Monday, January 30: Belgian bond auction