USD/CAD Fundamental Analysis June 5, 2012, Forecast

Analysis and Recommendations:

The USD/CAD is trading at 1.0392. Friday’s weak GDP (0.1%m/m and 1.9% for Q1 annualized) combined with the escalation in Europe, has cemented a more dovish expectation from the BoC this week. In the last statement, it was noted that: “The external headwinds” facing Canada have abated somewhat, with the U.S. recovery more resilient and financial conditions more supportive than previously anticipated”, this is likely no longer true, which has helped push the expectation for interest rates in Canada from pricing in a rate hike to a 56% chance of a rate cut in the next 9‐months. Friday’s CFTC FX sentiment report highlights that traders are net long CAD , a position that is likely to be unwound and aggravate CAD weakness. This week’s focus is global central banks, the potential for a shift in tone could help contain CAD losses, even with a more dovish BoC.

The flagging economic indicators from the U.S and China are proving to be a headwind for investors, who are already unnerved by the escalating debt concerns in the Euro region. Looking into this week, key central bank actions are scheduled, which could entice market forces. After a disappointing payroll numbers from the U.S on Friday, market onlookers would be keenly looking forward to the Federal Reserve Chairman Bernanke’s testimony before the Congress on Thursday, where a possible hint of QE3 could be on cards. With European economies battered by rising debts, all eyes would be on the European Central Bank (ECB) meeting on Thursday, where President Draghi is expected to retain the rates at 1 percent but could initiate bond buying action amid spreading contagion. German Chancellor Angela Merkel is expected to meet EU commissioner Jose Barroso in Berlin today evening to discuss on current situation in Europe, including the preparation for the next European Council meeting June 28-29 in Brussels. Overall, the week could be held hostage to events unfolding in Europe, although hopes of a QE3 could rejuvenate market entities.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Economic Data June 4, 2012 actual v. forecast (virtually no eco data in Europe or the US today)

Date

 

Currency

 

 

 

Event

Actual

 

Forecast

 

Previous

 

 

Jun. 04

 

JPY

 

 

 

Monetary Base (YoY) 

2.4%

 

0.2% 

 

-0.3% 

 

 

 

 

AUD

 

 

 

MI Inflation Gauge (MoM) 

0.0%

 

 

 

0.3% 

 

 

 

 

AUD

 

 

 

Company Gross Profits (QoQ) 

-4.0%

 

-2.0% 

 

-6.5% 

 

 

 

 

AUD

 

 

 

ANZ Job Advertisements (MoM) 

-2.40%

 

 

 

-0.80% 

   

 

Upcoming Economic Events that affect the CAD and USD

Date

Time

Currency

 

Forecast

Previous

 

Jun 5

12:30

CAD

Building Permits m/m

 

4.7%

13:00

CAD

BOC Rate Statement

   

13:00

CAD

Overnight Rate

1.00%

1.00%

14:00

USD

ISM Non-Manufacturing PMI

 

53.5

 

Jun 6

12:30

USD

Revised Nonfarm Productivity q/q

 

-0.5%

14:30

USD

Crude Oil Inventories

   

18:00

USD

Beige Book

   

 

Jun 7

12:30

USD

Unemployment Claims

 

383K

14:00

CAD

Ivey PMI

 

52.7

14:00

USD

Fed Chairman Bernanke Testifies

   

 

Jun 8

12:15

CAD

Housing Starts

 

245K

12:30

CAD

Employment Change

 

58.2K

12:30

CAD

Trade Balance

 

0.4B

12:30

CAD

Unemployment Rate

 

7.3%

12:30

CAD

Labor Productivity q/q

 

0.7%

12:30

USD

Trade Balance

 

-51.8B

14:00

USD

Fed Chairman Bernanke Testifies

   

Government Bond Auctions

Date  Time  Country 

Jun 05  00:30  Japan 

Jun 05  09:30  Belgium

Jun 05 14:30  Sweden 

Jun 06  09:30  Germany 

Jun 06  09:30  Portugal 

Jun 06 14:30  UK 

Jun 07  00:30  Japan 

Jun 07  08:30  Spain 

Jun 07  08:50  France 

Jun 07  09:10  Sweden 

Jun 07  15:00  US 

Jun 08  10:00  Belgium 

Jun 08  15:30  Italy 

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