USD/CAD Weekly Fundamental Analysis, October 6 – October 10, 2014 Forecast

The USD/CAD rose to its highest point in six months after the Canadian Government reported that the country posted an unexpected trade deficit in August, supporting the Bank of Canada’s weak assessment of the economy. Further selling pressure came after better-than-expected U.S. Non-Farm Payrolls data strengthened expectations that the Federal Reserve could begin hiking interest rates sooner rather than later.

Sellers took control of the market, following the release of the September jobs report which showed the U.S. economy added 248,000 new jobs versus pre-report estimates of 215,000. The unemployment rate also fell below 6.0%. The news drove up U.S. interest rates which made the U.S. Dollar a more attractive investment than the Canadian Dollar.

While the world seems to have decided the Fed will be the first major central bank to begin raising interest rates, the sluggish Canadian economy has forced its central bank to maintain a cautious outlook. The Bank of Canada held its benchmark interest rate at 1 percent for four years, but last month it hinted that interest rates could go either way at this time. It is waiting for a sustained export recovery that can power economic growth.

Clarity and conviction are on the side of the U.S. so long for the upside bias to continue for the USD/CAD.  

High Impact Economic Events That Traders Should Be Aware Of This Coming Week

Currency         Event                                                                      Forecast                           Previous

Monday, October 6

CAD                Ivey PMI                                                                    53.4                                   50.9

Tuesday, October 7

CAD                 Building Permits                                                                                               11.8%

Wednesday, October 8         

USD                FOMC Meeting Minutes

Thursday, October 9

USD                Unemployment Claims                                           291K                                287K

Friday, October 10

CAD                Unemployment Change                                                                                 -11.0K

CAD                Unemployment Rate                                                                                          7.0K