USD/CAD Fundamental Analysis Jan. 25, 2012, Forecast

Economic Events: (GMT)

15:00     USD       Pending Home Sales (MoM)                      -0.5%                     7.3%

The National Association of Realtors (NAR) Pending Home Sales Report measures the change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction.

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.

19:15     USD       Interest Rate Decision                                 0.25%                    0.25%

Federal Open Market Committee (FOMC) members vote on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.

A higher than expected rate is positive/bullish for the USD, while a lower than expected rate is negative/bearish for the USD.

 19:15    USD       FOMC Statement

The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) statement is the primary tool the panel uses to communicate with investors about monetary policy. It contains the outcome of the vote on interest rates, discusses the economic outlook and offers clues on the outcome of future votes.

A more dovish than expected statement could be taken as negative/bearish for the USD, while a more hawkish than expected statement could be taken as positive/bullish for the USD.

Analysis and Recommendations:

The USD/CAD is currently trading 1.0096 as the USD picked up steam in afternoon trading. As trouble continued to unfold in the eurozone over the Greek Credit Crisis and negotiations of avoid a disorderly default failed the investors sought the comfort of the USD, pushing the greenback up against its counterparts. In early morning trading the CAD was strong supported by better then expected retail sales reports, pushing the CAD up 1.0142 but as the day continued on, the US dollar would win the dropping to 1.00742.

Wedneday the US has several economic reports due but most important will be the FOMC statements. In truth it is the battle being fought in Brussels and Athens, to find a way to stop Greece from collapsing. Creditors have said they have moved all they can, and they still do not have a deal, and the hopes of any deal to come from prior negotiations failed when the EU Ministers declined the coupon/interest rates to be paid on the swapped bonds.

The markets will respond to news from Europe, more on a reactionary basis then on a sound judgement.

Also as tensions mount with Iran, the price of Crude could push up the Canadian Dollar, keep an eye here as well.

 

Upcoming Govt Bond Sales Dates

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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