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

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

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

Name S3 S2 S1 Pivot R1 R2 R3

Classic
0.9962
0.9986
1.0017
1.0041
1.0072
1.0096
1.0127

Fibonacci
0.9986
1.0007
1.0020
1.0041
1.0062
1.0075
1.0096

Camarilla
1.0032
1.0037
1.0042
1.0041
1.0053
1.0058
1.0063

Woodie's
-
0.9988
1.0020
1.0043
1.0075
1.0097
-

DeMark's
-
-
1.0084
1.0047
1.0029
-
-