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

USD/CAD Forecast Jan. 23-27, 2012, Fundamental Analysis
USD/CAD Forecast Jan. 23-27, 2012, Fundamental Analysis
The USD/CAD pair rebounded to the downside last week after the upbeat flow of major fundamentals and bond auctions through the week, where the high yielding assets strengthened and gained strength against the low yielding assets specially the U.S. dollar as the sentiment improved in the market and optimism spread wide after the downgrades last week failed to prevent European nations from accessing the capital market successfully.

Moreover, markets gained on the resumed Greek debt-talks as some progress was reached in finalizing a deal with the private sector on the percentage haircut and the coupon rate on the Greek bonds. However, the results are set to be provided by the end of this week. The importance of the talks is driven by the International Monetary Fund and European Union which demanded the nation to finish with the deal in order to become eligible to the offered second bailout package.

Traders will be eyeing the FOMC rate decision later on Wednesday, where the majority of analysts expect the FOMC to leave the current monetary policy unchanged. In addition, the GDP figures for the fourth quarter are expected at a strong 3.0% expansion compared with the prior 1.8%.

Nonetheless, traders will also continue to monitor the developments from the 17-bloc euro nation and the European leader’ latest moves to contain the debt crisis, where we expect volatility to persist through the sessions this week.

Moreover, several euro zone nations are preparing for bond auctions, where all eyes will be focused on the yields and demand on those bonds.

Overall, we preserve our bullish outlook for the USD/CAD pair, since financial markets conditions continue to suggest that demand for lower yielding assets will remain strong, and that should continue to provide the USD/CAD pair with more bullish momentum. However, positive data could keep the pressure on the pair and push it further to the downside.

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

Monday January 23:

No major fundamentals will be released from the U.S. economy.

Auctions:

10:00 GMT Slovakia sells bills

10:15 GMT Germany sells bills

14:00 GMT France to sells bills

Tuesday January 24:

No major fundamentals will be released from the U.S. economy.

Auctions:

09:00 GMT Netherlands sells bills

09:30 GMT Spain sells bills

10:00 GMT Malta sells bills

Wednesday January 25:

The United States Pending Home Sales are due at 15:00 GMT for the month of December and are expected to remain flat after 7.3% rally the previous month.

At 17:30 GMT the market awaits the FOMC rate decision where the Federal Reserve is expected to keep rates near zero at the 0.25-0.0% range while unlikely to take any new stimulus decisions though still the focus will be on any signal for more easing and support for the economy though still unlikely as the Feds buy time with the flow of good data and signs of stabilization.

Auctions:

10:15 GMT Germany sells bills

Thursday January 26:

The United States will start the day at 13:30 GMT with the Durable Goods Orders for December where the index is expected to have eased to 2.0% after 3.8% and excluding transportation expected at 0.9% rising from 0.3%.

Initial jobless claims are due at the same time for the week ending January 21 after they declined last week to 352,000.

Leading Indicators for the month of December will be released at 15:00 GMT and expected to improve to 0.7% after 0.5%.

Also at 15:00 GMT the New Home Sales for December will be released and expected with 1.6% rise to 320 thousand from 315 thousand.

Auctions:

10:00 GMT Italy sells bills

Friday January 27:

The United States will end with top notch data where at 13:30 GMT the advanced GDP estimate for the fourth quarter is expected to show a strong 3.0% expansion following 1.8% growth in the third quarter.

Core PCE is expected to slow to 0.9% after 2.1% while Personal Consumption expected with a leap to 2.5% after 1.7%.

The week’s data will end at 14:55 GMT with the University of Michigan Confidence for January which is expected unrevised from the advanced estimate at 74.0.

Auctions:

10:00 GMT Italy sells bills

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