USD/CAD
USD/CAD Weekly Fundamental Analysis Jan. 23-27, 2012, Forecast

USD/CAD Weekly Fundamental Analysis Jan. 23-27, 2012, Forecast

Economic Events

See daily forecasts for detailed information on each economic event

Jan. 24

13:30 CAD Core Retail Sales (MoM) 0.2% 0.7%

Jan. 25

19:15 USD Interest Rate Decision 0.25% 0.25%

19:15 USD FOMC Statement

Jan. 26

13:30 USD Core Durable Goods Orders (MoM) 0.9% 0.3%

13:30 USD Initial Jobless Claims 370K 352K

15:00 USD New Home Sales 320K 315K

Jan. 27

13:30 USD GDP (QoQ) 3.0% 1.8%

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 was up and down all week, with positive jobs reports and negative housing data, but moved up against all currencies on Friday. Crude Oil dropped towards the end of the week, adding to the weakness of the loonie

The pair ended the week at 1.0132

The entire week seemed to be focused on Greece and the negotiations with the IIF representatives as deadlines approached. There were rumors flying in every direction, moving the markets but at the close of day Friday no deal had been reached and the IIF representatives packed up and went home stating the negotiations would continue over the week by phone.

The pair is expected to continue to the decline in the beginning of the week, there are several economic reports due early that could affect the markets, but the main event is the EU and Greece, news, rumor, truth or fiction, will move the markets.

Keep an eye on Gold, as it surged on Friday as investors moved to safe-havens. This week will be about safety and risk appetite. A continued drop in crude could also reduce

As of this writing, there have been no final agreements on Greece and the EU meetings are scheduled for tomorrow. It looks more and more like a Greece default or intervention by the ECB or the IMF.

Upcoming Govt Bond Sales Dates

Jan 23  10:10  Norway  Nok 6.0bn 4.25% May 2017 bond

Jan 23  10:10  Slovakia  Auctions Apr 2014 bond

Jan 23  10:30  Germany  Eur 3.0bn Jan 2013 Bubill

Jan 23  12:00  Norway  Details bond auction on Jan 30

Jan 24  09:30  Netherlands Eur 1.5-2.5bn Jan 2013 & Jan 2042 DSL

Jan 24  09:30  Spain  Auctions 3 & 6M T-bills

Jan 24  16:30  Italy   Details CTZ/BTPei on Jan 26 & BOT on Jan 27 &

Jan 24  18:00  US  Auctions 2Y Notes

Jan 25  10:10  Sweden  Nominal bond auction

Jan 25  10:30  Germany  Eur 3.0bn 3.25% Jul 2042 Bund

Jan 25  16:30  Italy   Details BTP/CCTeu on Jan 30

Jan 25  18:00  US  Auctions 5Y Notes

Jan 26  10:10  Italy   Auctions CTZ/BTPei

Jan 26  18:00  US  Auctions 7Y Notes

Jan 27  10:10  Italy   BOT auction

USD/CAD Pivot Points (Time Frame: 1 Day)
 

Name S1 S2 S3 Pivot R1 R2 R3

Classic
1.0104
1.0088
1.0058
1.0134
1.0150
1.0180
1.0196

Fibonacci
1.0116
1.0105
1.0088
1.0134
1.0151
1.0162
1.0180

Camarilla
1.0117
1.0113
1.0108
1.0134
1.0125
1.0129
1.0134

Woodie's
1.0098
1.0085
-
1.0131
1.0144
1.0176
-

DeMark's
1.0142
-
-
-
1.0096
-
-