USD/CAD Daily Fundamental Analysis for August 16, 2011

By FXEmpire.com

The USD/CAD pair fell on Monday, where rising risk appetite around global financial markets after the Japanese economy contracted yet the contraction was above estimate, which boosted higher yielding assets, and provided the CAD with momentum to rise against the USD, accordingly, the USD/CAD pair dropped to the downside. Moreover, rising crude oil prices further supported the CAD against the USD.

The uncertainty that continues to dominate global financial markets should continue to boost demand for lower yielding and more safe assets, and accordingly, we preserve our bullish outlook for the USD/CAD pair, and any downside movements are not expected to prevail for long, since risk aversion will provide the USD/CAD pair with the needed bullish momentum.

Tuesday August 16:

Germany will start the GDP day at 06:00 GMT with the expected slowing pace of expansion into the second quarter with 0.5% from 1.5% recorded in the first quarter.

The GDP data from the euro zone is due at 09:00 GMT for the second quarter and surely expectations are for slowing pace of expansion at 0.3% following 0.8% in the first quarter of the year.

Other than the critical GDP data, the focus will also be on the scheduled meeting between Merkel and Sarkozy to discuss the worsening crisis in the euro area which markets will track closely and increase the volatility.

From the United States the Housing Starts for July is due at 12:30 GMT which is expected with 3.3% drop to 608 thousand from 629 thousand.

At 12:30 GMT, Canada will release the manufacturing sales index for June, where it’s expected to drop by 0.5%, compared with the prior drop of 0.8% back in May.

At 13:15 GMT, the Industrial Production for July is expected with 0.5% rise following 0.2% while the Capacity Utilization to rise marginally to 76.9% from 76.7%.