USD/CAD Daily Fundamental Analysis for August 23, 2011

The USD/CAD pair extended its drop on Monday, as optimism amid speculations the Fed will announce more stimulus to help the economic recovery regain its momentum, where traders increased their bets of a third round of quantitative easing by the Federal Reserve Bank, which weighed down on the U.S. dollar, and provided the CAD with momentum to push the USD/CAD pair to the downside.

If the Fed announces QE3, we should expect the USD/CAD pair to extend its losses over the coming period, since it will weaken the USD and will also boost demand for riskier assets, which will provide the CAD with strong momentum to push the USD/CAD pair further to the downside.

Tuesday August 23:

Canada will release the retail sales index for the month of June at 12:30 GMT, where retail sales are expected to rise by 0.5%, compared with 0.1% in May, while retail sales less autos are expected to rise by 0.2% in June, compared with 0.5% in May.

The United States will start the data at 14:00 GMT with the New Home Sales for July which are expected with 1.0% rebound to 315 thousand from 312 thousand.

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