USD/CAD Fundamental Analysis Jan. 20, 2012, Forecast

Economic Events: (GMT)

12:00 CAD Core CPI (MoM) -0.30% 0.10%

The Core Consumer Price Index (CPI) measures the changes in the price of goods and services, excluding food and energy. The CPI measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation.

A higher than expected reading should be taken as positive/bullish for the CAD, while a lower than expected reading should be taken as negative/bearish for the CAD.

12:00 CAD CPI (MoM) -0.10% 0.10%

The Consumer Price Index (CPI) measures the change in the price of goods and services from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation.

A higher than expected reading should be taken as positive/bullish for the CAD, while a lower than expected reading should be taken as negative/bearish for the CAD.

13:30 CAD Wholesale Sales (MoM) 1.00% 0.90%   

Wholesale Sales measures the change in the total value of sales at the wholesale level. It is a leading indicator of consumer spending.

A higher than expected reading should be taken as negative/bearish for the CAD, while a lower than expected reading should be taken as positive/bullish for the CAD.

15:00 USD Existing Home Sales 4.65M 4.42M

Existing Home Sales measures the change in the annualized number of existing residential buildings that were sold during the previous month. This report helps to gauge the strength of the U.S. housing market and is a key indicator of overall economic strength.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

 Analysis and Recommendations:

The USD/CAD is currently trading at 1.0116 after opening at 1.0112 and has stayed range bound all day.

Data in from the US showed jobless claims dropped to the lowest level in almost four years, while consumer prices remained flat for a 2nd month. Housing starts data came in weaker than expected showing that the construction sector – despite some improved confidence – still has a way to go to. Even though, market reports were saying there would be an increase in housing starts, until the foreclosure glut is absorbed housing starts will remain low.

Other positive signs for the US labor market was the drop in jobless claims falling by a larger than expected figure falling to 352K, the lowest since 2008. This follows a sharp increase in claims the previous week to above the 400K level.

On the other hand, the Canadian dollar is benefiting from the increase in crude oil prices.

There are many factors at play in Europe today, there are rumors on the Greek Negotiations. There is the positive news on the French and Spanish Bond sales and the IMF discussion on increasing their funding and ongoing discussions with Greece to offer aid.

Combined with UK job rate surge… it is difficult to make heads or tails where the CAD will shake out in all of this. There are several economic reports due on Friday, these might give a boost to the CAD, but it is most likely that the loonie will remain in a tight concentration throughout the weekend.

Upcoming Govt Bond Sales Dates

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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

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