Forexpros – The U.S. dollar rose to a seven-week high against its Canadian counterpart on Friday, as ongoing worries over debt contagion in the euro zone’s core economies supported demand for the safe haven greenback.
USD/CAD hit 1.0522 on Friday, the pair’s highest since October 5; the pair subsequently consolidated at 1.0464 by close of trade on Friday, climbing 1.88% over the week.
The pair is likely to find support at 1.0369, the low of November 23 and resistance at 1.0570, the high of October 5.
The greenback rallied against the loonie on Wednesday as risk sentiment was hit after Germany, the euro zone’s largest economy, missed its EUR6 billion sales target at an auction of 10-year bonds, in its least successful debt sale since the launch of the single currency.
The poorly received auction was due in some part to low bond yields but sparked concerns that the debt crisis may have started affecting the euro zone’s largest economy.
Meanwhile, ratings agency Fitch warned that France could lose its triple-A credit rating if European Union leaders fail to take action to prevent the crisis from worsening.
Investors remained jittery after comments by German Chancellor Angel Merkel underlined concerns that European leaders would be unable to find a resolution to the debt crisis.
Speaking at a joint news conference with France’s Nicolas Sarkozy and Italy’s Mario Monti following a meeting on Thursday, Merkel reiterated her belief that joint euro zone bonds would remove incentives for individual states to improve their fiscal discipline and rejected calls for an expanded role for the ECB in fighting the debt crisis.
On Friday, Italian 10-year bond yields climbed to near unsustainable levels, rising above 7% even as the European Central Bank bought bonds in the secondary market.
The rise in Italian borrowing costs came after a disappointing auction of Italian government debt and fanned fears that the debt crisis in the region is deepening.
Earlier in the week, the U.S. super-committee created to cut the country’s deficit said that it failed to reach a deal, signaling that several tax programs, including a payroll-tax holiday, risk expiring at the beginning of next year. Still, ratings agency Standard & Poor’s reaffirmed it would keep the U.S.’s credit rating at AA+ after stripping the government of its top AAA grade on August 5.
In the week ahead, investors will be eyeing an auction of Belgian government debt on Monday after ratings agency Standard & Poor’s downgraded its rating on Belgium by one notch on Friday.
Meanwhile, euro zone finance ministers are to meet Wednesday to discuss details on leveraging the region’s bailout fund, although a major announcement is unlikely.
Also next week, the U.S. is to release its closely watched report on non-farm payrolls, while Canada is to publish monthly data on gross domestic product.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, November 28
The U.S. is to release official data on new home sales, a leading indicator of economic health.
Tuesday, November 29
The U.S. is to release industry data on house price inflation as well as a report on consumer confidence, a leading indicator of consumer spending.
Elsewhere, Canada is to produce data on the current account.
Wednesday, November 30
Later in the day, the U.S. is to release a closely watched report on non-farm payrolls compiled by payroll processing firm ADP, which leads government data by two days. The U.S. is also to release data on manufacturing activity in the Chicago area as well as government reports on pending home sales, non-farm productivity, labor costs and crude oil stockpiles. This data can be a big market mover for the loonie due to the size of Canada’s energy sector.
Also Wednesday, Canada is to publish monthly data on gross domestic product, the broadest measure of economic activity and the primary gauge of the economy’s health, as well as data on inflation.
Thursday, December 1
The U.S. is to release its weekly report on initial jobless claims, while the Institute of Supply Management is to release data on manufacturing activity.
Friday, December 2
Canada is to publish official data on employment change and the unemployment rate.
The U.S. is to round up the week with a closely watched government report on non-farm employment change, a leading indicator of economic health, as well as data on average hourly earnings and the unemployment rate.
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