By FXEmpire.com
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 closed the week down trading at 1.0138. The USD was strong all week as risk aversion remained the theme. Domestic data has been relatively strong and risk aversion, as measured by either the VIX or currency volatility, remains low, typically positive for CAD. In addition, the outlook for the US, somewhat compromised by a weak ISM and employment report but on a relative basis still brighter than many has helped not just CAD, which has outperformed since the beginning of July. Yesterday’s new two-year USD index (DXY) high was important for several reasons, but one of the most important for FX valuation was that it was not driven by a sudden spike in risk aversion, but instead relative fundamentals
|
Date |
Open |
High |
Low |
Change % |
|
|
Jul 13, 2012 |
1.0138 |
1.0201 |
1.0204 |
1.0130 |
-0.62% |
|
Jul 12, 2012 |
1.0201 |
1.0193 |
1.0250 |
1.0177 |
0.08% |
|
Jul 11, 2012 |
1.0193 |
1.0224 |
1.0231 |
1.0173 |
-0.30% |
|
Jul 10, 2012 |
1.0224 |
1.0194 |
1.0230 |
1.0166 |
0.30% |
|
Jul 09, 2012 |
1.0193 |
1.0198 |
1.0221 |
1.0184 |
-0.05% |
Canadian markets will be heavily focused upon the Bank of Canada’s latest interest rate statement (Tuesday) and the Monetary Policy Report (Wednesday). After a strongly dovish bias since last Fall, the BoC then went abruptly more hawkish in April and bought into the view that the US outlook had improved and that markets were on sounder footings back then. Since then growth in the US and Canada has disappointed BoC expectations. The BoC’s last full set of forecasts in the April MPR expected Q1 Canadian GDP to come in at 2.5% q/q annualized growth and instead 1.9% was delivered with a full percentage point of that being driven by inventory building that characterized a moribund ex-inventory growth rate
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 July 9 – 13 actual v. forecast for the Canadian & US Dollar
|
Date |
Currency |
Event |
Actual |
Forecast |
Previous |
|
Jul 10 |
CAD |
Housing Starts |
223K |
203K |
217K |
|
Jul 11 |
CAD |
Trade Balance |
-0.8B |
-0.5B |
-0.6B |
|
USD |
Trade Balance |
-48.7B |
-48.5B |
-50.6B |
|
|
USD |
Crude Oil Inventories |
-4.7M |
-1.3M |
-4.3M |
|
|
Jul 12 |
CAD |
NHPI m/m |
0.3% |
0.2% |
0.2% |
|
USD |
Unemployment Claims |
350K |
376K |
376K |
|
|
USD |
Import Prices m/m |
-2.7% |
-1.5% |
-1.2% |
|
|
USD |
Federal Budget Balance |
-59.7B |
-91.7B |
-124.6B |
|
|
Jul 13 |
USD |
PPI m/m |
0.1% |
-0.5% |
-1.0% |
|
USD |
Core PPI m/m |
0.2% |
0.3% |
0.2% |
|
|
USD |
Prelim UoM Consumer Sentiment |
72.0 |
73.5 |
73.2 |
Historical:
Highest: 1.0842 CAD on Nov 01, 2009.
Average: 1.0147 CAD over this period.
Lowest: 0.9407 CAD on Jan 26, 2011.
Economic Highlights of the coming week that affect the Canadian and American Markets
|
Date |
Time |
Currency |
Event |
Previous |
|
Jul 16 |
12:30 |
CAD |
Foreign Securities Purchases |
10.20B |
|
12:30 |
USD |
Retail Sales m/m |
-0.2% |
|
|
12:30 |
USD |
Empire State Manufacturing Index |
2.3 |
|
|
14:00 |
USD |
Business Inventories m/m |
0.4% |
|
|
Jul 17 |
9:15 |
ALL |
G7 Meetings |
|
|
12:30 |
CAD |
Manufacturing Sales m/m |
-0.8% |
|
|
12:30 |
USD |
CPI m/m |
-0.3% |
|
|
13:00 |
CAD |
BOC Rate Statement |
||
|
13:00 |
CAD |
Overnight Rate |
1.00% |
|
|
13:00 |
USD |
TIC Long-Term Purchases |
25.6B |
|
|
13:15 |
USD |
Industrial Production m/m |
-0.1% |
|
|
Jul 18 |
12:30 |
USD |
Building Permits |
0.78M |
|
12:30 |
USD |
Housing Starts |
0.71M |
|
|
14:30 |
CAD |
BOC Monetary Policy Report |
||
|
14:30 |
USD |
Crude Oil Inventories |
-4.7M |
|
|
15:15 |
CAD |
BOC Press Conference |
||
|
Jul 19 |
12:30 |
CAD |
Wholesale Sales m/m |
1.5% |
|
12:30 |
USD |
Unemployment Claims |
||
|
14:00 |
USD |
Existing Home Sales |
4.55M |
|
|
14:00 |
USD |
Philly Fed Manufacturing Index |
-16.6 |
|
|
Jul 20 |
12:30 |
CAD |
CPI m/m |
-0.1% |
Click here a current USD/CAD Chart.
Originally posted here
