By FX Empire.com
Economic Events
Jan. 30 13:30 USD Core PCE Price Index (MoM) 0.1% 0.1%
13:30 USD Personal Spending (MoM) 0.2% 0.1%
13:30 CAD GDP (MoM) 0.2% 0.0%
13:30 USD Employment Cost Index (QoQ) 0.4% 0.3%
14:45 USD Chicago PMI 63.0 62.5
15:00 USD CB Consumer Confidence 68.2 64.5
Feb. 01 13:15 USD ADP Nonfarm Employment Change 190K 325K
15:00 USD ISM Manufacturing Index 54.5 53.9
Feb. 02 13:30 USD Nonfarm Productivity (QoQ) 1.0% 2.3%
13:30 USD Initial Jobless Claims 373K 377K
13:30 USD Unit Labor Costs (QoQ) 0.9% -2.5%
13:30 USD Continuing Jobless Claims 3565K 3554K
15:00 USD Fed Chairman Bernanke Testifies
Feb. 03 00:15 USD FOMC Member Fisher Speaks
12:00 CAD Employment Change 24.0K 17.5K
12:00 CAD Unemployment Rate 7.5% 7.5%
13:30 USD Average Hourly Earnings (MoM) 0.2% 0.2%
13:30 USD Nonfarm Payrolls 150K 200K
13:30 USD Unemployment Rate 8.5% 8.5%
13:30 USD Private Nonfarm Payrolls 170K 212K
15:00 USD ISM Non-Manufacturing Index 53.2 52.6
USD/CAD Weekly Fundamental Analysis Jan. 30- Feb. 3, 2012, Forecast
Historical:
Highest: 1.0842 CAD on 01 Nov 2009.
Average: 1.0147 CAD over this period.
Lowest: 0.9435 CAD on 26 Jul 2011.
Rule:
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%.
Trading Ideas
1) if you believe the price of oil will keep rising, it might be a good strategy to buy the Canadian dollar because it’s 81% positive correlation to oil over the past years.
2) Since the USD/CAD pair tends to be highly correlated to oil, it might be a good idea to compare both Canadian dollar and oil charts in order to predict future moves, if for example oil breaks above an important resistance level and USD/CAD didn’t break resistance level yet, the USD/CAD is very likely to break above also. This illustrates how oil tends to lead the move ahead of USD/CAD.
Analysis and Recommendation:
The USD/CAD closed at 1.0017 -0.0001 (-0.01%)
All movement here was based on USD weakness; there were no indications for Canada. Oil continued to trade close to the 100.00 level offering supports to the CAD.
The Good:
US Durable Goods orders in Dec surprise to upside but how much was pulled forward from 2012 due to 12/31 expiration of full depreciation expensing?
Jan US confidence rises to best since Feb ’11
Richmond and KC manufacturing survey’s both rise
The Bad:
Q4 US GDP rises 2.8%, a touch below expectations but nominal GDP gains just 3.2%, the weakest since Q3 ’09. If deflator was in line with expectations, Real GDP would have been up just 1.3%. Real final sales up just .8% vs. 3.2% in Q3
Initial Jobless Claims normalize at 377k after holiday distorted 356k last week
Inflation expectations within UoM rise to 3.3%, the most since Sept and remains above the 20 yr avg of 3.0%. Expectations also rise to multi month highs in TIPS market
New Home Sales remain weak, prices fall 12.8% y/o/y
FOMC stretches out zero rates until late 2014, US$ resumes downward trend against everything. Fed destroying the price mechanism as if interest rates are artificially priced, what are assets really worth? If we don’t know what assets are really worth, how can capital be efficiently allocated?
This week’s movement has been in response to the weakness developed in the USD from the FOMC statements and continuing with the weak economic data from the US.
Upcoming Sovereign Bond Sales Dates
Jan 30 10:10 Italy BTP/CCTeu auction
Jan 30 10:10 Norway Nok 4.0bn 5.0% May 2015 bond
Jan 30 11:00 Belgium OLO Auction
Jan 30 12:00 Norway Details bond auction on Feb 06
Jan 31 10:30 Belgium Auctions 3 & 6M T-bills
Jan 31 15:30 UK Details gilt auction on Feb 07
Feb 01 10:10 Sweden Auctions T-bills
Feb 01 10:30 Germany Eur 5.0bn 2.0% Jan 2022 Bund
Feb 01 10:30 Portugal Eur 0.75-1.0bn 3M T-bill
Feb 01 10.30 UK Auctions 5.0% 2025 conventional Gilt
Feb 01 15:30 Sweden Details nominal bond auction on Feb 08
Feb 01 16:00 US
Announces details of 3Y Notes on Feb 07, 10Y Notes on Feb
08 & 30Y Bonds on Feb 09
Feb 02 09:50 France OAT Auction
Feb 02 10.30 UK Auctions 0.125% 2029 I/L Gil
Originally posted here
