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

Economic Events: (GMT)

08:30     USD     GDP Price Index (QoQ)     2.0%     2.6%

08:30     USD     GDP (QoQ)     3.0%     1.8%

The GDP Price Index measures the annualized change in the price of all goods and services included in gross domestic product.It is the broadest inflationary indicator.

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.                          

 09:55    USD     Michigan Consumer Sentiment Index     74.2     74.0

The University of Michigan Consumer Sentiment Index rates the relative level of current and future economic conditions. There are two versions of this data released two weeks apart, preliminary and revised. The preliminary data tends to have a greater impact. The reading is compiled from a survey of around 500 consumers.

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 0.99.94 (-0.4879%)

The USD continues lower today against all currencies. The Canadian dollar simply reacted to US weakness and remained as it was with with economic data to support a move up. The World Economic Forum is meeting in Switzerland this week. The Swissie was bouyed on US data.

The greenback continued to drop against most major currencies today continuing losses after two major U.S. economic reports showed jobless claims and durable-goods orders jumped. One positive and the other negative. Followed by a huge miss in the housing market.

The downward spiral comes the day after the Federal Reserve said interest rates may remain at current levels until late 2014, reducing the appeal of the USD to international investors, regardless of the positive comments about growth and the economy.

The dollar index dropped to 79.248, and is well below its 80.131 level ahead of the Fed’s policy announcement.

In a news conference, Chairman Ben Bernanke said expanding its balance sheet remains an option and the central bank stands ready to ease further if the outlook worsens. Bernanke said it’s too early to say strong growth is here to stay. As for the bonds the Fed already holds, he said sales of those have been pushed back to 2015.

The two reports released in the US today, showed new applications for unemployment climbed sharply last week. Jobless claims climbed by 21,000 to a seasonally adjusted 377,000 in the week ended Jan. 21, the Labor Department said Thursday. Claims from two weeks ago were revised up by 4,000.

The number of claims varies in January due to holiday temporary hiring’s despite government efforts to adjust for seasonal factors.

The markets pay more attention to the four-week average which showed claims fell slightly, down 2,500 to 377,500.

The second report release was on durable goods, where stronger orders for airplanes and machinery translated into a better-than-expected 3.0% increase in durable-goods orders in December.

Later in the day  the U.S. Census Bureau said new home sales fell by 2.2% to a seasonally adjusted 307,000 units in December, confounding expectations for a 2% gain to 320,000.

As investors look closely through the recent data for any sign of improvement, the manufacturing sector remains a decidedly bright spot for the U.S. economy.

 

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