USD/CAD Fundamental Analysis July 27, 2012, Forecast

Analysis and Recommendations:

The USD/CAD fell slightly to trade at 1.0079 as the USD weakened. CAD is up 0.6% to yesterday’s close. Considering the macro environment, USDCAD has traded in a relatively tight 647 point (0.9800 to 1.0447) range in 2012. Risk reversals are trending lower and have shifted faster than USDCAD, suggesting that spot has yet to react to the option’s market declining interest in protecting against USD upside. Meanwhile, interest rate spreads are also trending lower and acting as somewhat of a weight against USDCAD. Finally, USDCAD has been tied relatively tightly to oil prices. While risk aversion jumped higher last Friday, it has failed to move up to the May/June highs and today’s comment by ECB President Draghi have increased risk appetite; opening the door to USDCAD downside

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Economic Data July 26, 2012 actual v. forecast

Date	Currency	Event	Actual	Forecast	Previous
Jul. 26	KRW	South Korean GDP (QoQ)	0.4%	0.5%	0.9%
JPY	BoJ Governor Shirakawa Speaks
EUR	GfK German Consumer Climate	5.9	5.8	5.8
USD	Core Durable Goods Orders (MoM)	-1.1%	0.1%	0.8%
USD	Durable Goods Orders (MoM)	1.6%	0.4%	1.6%
USD	Initial Jobless Claims	353K	380K	388K
USD	Continuing Jobless Claims	3287K	3310K	3317K