By FX Empire.com

The USD/CAD pair rallied to the upside last week, as the U.S. dollar strengthened on mounting fears the European debt crisis is worsening, where yields on Italian bonds rose last week above 7%, a level that forced Greece, Ireland, and Portugal to seek bailouts, while yields on Spanish bonds also rose last week, which raised fears that the debt crisis is spreading into major economies within the euro zone area.

Meanwhile, economic data from the United States generally showed better than expected performance, where manufacturing activities continued to expand in November, while retail sales rose above forecasts in October, which eased some of the concerns in markets over the outlook for growth in the world’s largest economy. Nonetheless, the huge pessimism from Europe remained the dominant theme around global financial markets.

Data from Canada last week showed that price pressures eased in October, but CPI inflation rose above median estimates, while the leading indicators rose in October above median estimates.

Europe will be very much the focus next week, where traders will be eyeing new developments on the European debt crisis, where Italy and Spain, the third and fourth largest economies in the euro zone area, are starting to feel the pressure from the debt crisis, and the uncertainty that is surrounding the outlook continues to weigh down on confidence.

Important data will be released from Europe and the United States next week, where manufacturing and growth figures are expected from Germany, while the U.S. economic calendar is full of economic data on housing, growth, income, and confidence. Accordingly, we should expect heavy fluctuations to dominate gold prices next week. We should also note that U.S. markets will be closed on Thursday, as Americans celebrate Thanks Giving, while U.S. markets will close early on Friday. Data from Canada will be limited next week to wholesale sales and retail sales.

Also, on Wednesday November 23, the deadline set by U.S. President Barack Obama for the super committee to announce budget cuts of at least $1.2 trillion in order to contain the widening budget deficit, will be due, and if the Congress fails to pass the cuts, an automatic measure to cut spending and raise taxes will be activated.

The high level of uncertainty in markets could provide the USD/CAD pair with more bullish momentum, where traders will be eyeing developments in Italy and Spain, and accordingly, we should expect Europe to dominate the pair’s movement next week. Nonetheless, if optimism spreads through markets, the USD/CAD pair will decline, as demand for higher yielding assets is likely to rise in that case, and that should provide the Canadian dollar with momentum.

Highlights for this week that will probably affect the USD/CAD pair’s direction are:

Monday November 21:

Canada will release the wholesale sales index for September at 13:30 GMT, which is expected to rise by 0.5% following the prior rise of 0.2% in August.

The United States will join the session at 15:00 GMT with the existing home sales figures for October, with expectations that the existing homes sales could have retreated to 4.80 million houses from 4.91 millions. In addition, the monthly existing home sales index could show that sales dropped by 2.2% from the previous drop of 3.0%.

Tuesday November 22:

At 13:30 GMT, Canada will release the retail sales for September, where retail sales are expected rise by 0.5% in line with the prior rise in August, while retail sales excluding autos are expected to rise by 0.3%, compared with 0.4% in August.

At 13:30 GMT, the United States will join the session with the GDP figures for the third quarter in a second reading, where the quarterly annualized GDP index could have lingered at 2.5%, while the personal consumption index could have stood at 2.4%, in the time GDP price index is expected unchanged at 2.5%. Finally, the quarterly core PCE is projected steady at 2.1%.

At 19:00 GMT the Federal Reserve will release the Minutes of FOMC last meeting.

Wednesday November 23:

At 13:30 GMT the United States will join the session with the durable goods figures for October, where durable goods orders could have fallen 1.0% from the previous drop of 0.8%, while durable goods excluding transportation index is expected unchanged, noting that the previous expansion was 1.7%.

The United States will also release the income report at 13:30 GMT, with expectations that the personal income index could have improved 0.3% from 0.1%, while the personal spending index could have expanded by 0.3% from 0.6%. Furthermore, the annual PCE Deflator could have expanded by 2.7% from 2.9%, while the monthly PCE core could have improved 0.1% from the previous zero expansion, in the time the annual PCE core is expected higher at 1.7% from 1.6%.

In addition, the United States will provide markets with the initial jobless claims figure for the 19th of November, where the number of claims could have eased to 385 thousands from 388 thousand.

At 14:55 GMT the United States will end the session with University of Michigan confidence for November in a final reading, where the confidence could have improved slightly to 64.5 from 64.2.

Thursday November 24:

The United States markets will be off to celebrate the Thanks Giving Holiday.

Friday November 25:

The United States markets will close early.

Originally posted here