USD/CAD Forecast December 14, 2011, Technical Analysis

USD/CAD continued to run higher during the session on Tuesday, even as the oil markets ran higher at the same time. Normally, the Canadian dollar gets a bid on oil demand. This shows just how “risk off” the market really is at this point in time. The market has broken above the 1.03 level, and this is a signal that we could be making a run towards the 1.05 level again, and perhaps the higher 1.07 level from late September.

We are willing to buy on pullbacks, and will be happy to do so. The 1.02 area looks like the bottom of that support level, and we think this area should give us a supportive candle from which to buy. We are very leery of selling this pair right now as the US dollar is the currency everyone wants to own right now.

USD/CAD Forecast December 14, 2011, Technical Analysis
USD/CAD Forecast December 14, 2011, Technical Analysis

USD/CAD Forecast Dec. 14, 2011, Fundamental Analysis

The USD/CAD pair rebounded to the upside on Tuesday, as pessimism dominated markets once again after reports suggested that German Chancellor Angela Merkel rejected increasing the bailout fund for European sovereign debt. Moreover, the worse than expected U.S. retail sales put more negative pressure on confidence, as retail sales rose in November but well below median estimates, retail sales increased by 0.2% in November, worse than median estimates of 0.5%., and accordingly, investors targeted lower yielding assets including the U.S. dollar, which pushed USD/CAD pair higher.

Traders will be eyeing the FOMC rate decision later on Tuesday, where the majority of analysts expect the FOMC to leave the current monetary policy unchanged, while on Wednesday, traders will be following the Import Price Index from the United States, and the leading indicators from Canada.

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.

The USD/CAD pair could still rise if the pessimism continues to dominate markets, but we still expect volatility to hold the steer for now, as uncertainty remains the main theme in markets, and that could also lead to deep fluctuations for the USD/CAD pair.

Wednesday December 14:

Canada will release the leading indicators for November at 13:30 GMT, which is expected to rise by 0.3% following the prior rise of 0.2% in October.

The United States will join the session at 13:30 GMT with the import price index for November, where the monthly index is expected to expand by 1.0% from the previous drop of 0.6%, while the annual index previous reading was 11.0%.

The Last Federal Reserve Meeting of the Year

The last Federal Reserve meeting of the year will take place today, the meeting will not focus on the potential rate cut and if announced it will only be a small sideline of the meeting. Today the Fed will be busy planning and discussing 2012.

While today’s meeting is likely to produce any explicit action Chairman Bernanke and associates are busy at work behind the scenes trying very hard to make the holiday season, and the outlook for 2012, a little brighter. A statement is expected at 2:15 p.m. There will not be a press conference by Bernanke.

Economists are hoping that the Fed will engineer another round of asset purchases, or quantitative easing, early next year with a good chance they will also buy mortgage-backed securities in the first half of the year, possibly as early as January, that would be a good step for the banks and would unfreeze a lot of lending power giving the banks additional liquidity.

The economy is slowly recovering, retail sales were not as good as expected for November, after all the hoopla on Black Friday, but there was a slight increase for the month. Unemployment is down, jobs are up a bit and GDP is moving along slowly but moving in positive steps, not like most of Europe.

Ben Bernanke is a slow and cautious Chairman, and he will most likely take a sit and let’s see attitude through the holidays. The Fed also needs time to see the possibilities of Europe pulling itself up before they have a full blown recession.

The purpose of the asset purchases at this juncture would be to help stabilize the financial system and alleviate interest rate risk and uncertainty. It looks more and more likely that we will hear some news about QE3 in today’s announcement as there is a good probability we will see the use of QE3 right after the first of the year.

The Fed is expected to leave the bank’s key interest rate at an historic low range of 0% to 0.25%. This will be the third anniversary of rates near zero, a sign of just how weak the economy remains.

The Fed is expected to maintain its guidance that it intends to keep rates near zero until mid-2013 given its expectations for the economy. This guidance will be central to the Fed’s discussions at the meeting.

Analysts think the Fed will spend the bulk of the meeting fleshing out details of a planned overhaul of how they signal policy plans. Some positive commentary from the Fed might drive and US markets and the USD to significant gains today.

USD/CAD Forecast December 13, 2011, Technical Analysis

USD/CAD rose on Monday as the markets sold off risk in general. The oil markets fell uniformly across all grades, and as a result, the Canadian dollar got hit because of the oil export relationship. The 1.03 area still acted as resistance though, and as a result – we like buying, but want to see a pullback at this point so we aren’t buying right into the resistance level. The selling of this pair doesn’t interest us at the moment as the “risk off” trade seems to be the norm these days.

USD/CAD Forecast December 13, 2011, Technical Analysis
USD/CAD Forecast December 13, 2011, Technical Analysis

USD/CAD Forecast Dec. 13, 2011, Fundamental Analysis

The USD/CAD pair rebounded to the upside on Monday as pessimism spread through markets after Friday’s EU summit. While Moody’s also added to the jitters by saying the EU will be under review after the summit failed to produce decisive measures to end the crisis. Investors are starting to doubt the ability of EU leaders to come up with a resolution to the debt crisis and accordingly, investors targeted lower yielding assets including the U.S. dollar, which pushed USD/CAD pair higher.

Traders will 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.

The USD/CAD pair could still rise if the pessimism continues to dominate markets, but we still expect volatility to hold the steer for now, as uncertainty remains the main theme in markets, and that could also lead to deep fluctuations for the USD/CAD pair.

Tuesday December 13:

The United States will join the session at 13:30 GMT with the retail sales index for November, where the advance retail sales index could have expanded by 0.6% from 0.5%, while the retail sales less Autos index could have advanced by 0.5% from 0.6%.

At 15:00 GMT the United States will provide the business inventories index for October, which could have improved 0.4% from the previous steady reading.

At 19:15 GMT the Federal Open Market Committee (FOMC) will announce the rate decision (DEC 13), with expectations the Federal Bank could have left rates unchanged at 0.25%.

USD/CAD Forecast Dec. 12th, 2011, Technical Analysis

USD/CAD had another tight day on Friday as the market ended up down slightly. The pair will follow the oil markets over time, and with those markets currently range bound, it makes sense that the Canadian dollar can’t decide where it wants to go. The 0.99 – 1.01 levels are the boundaries of massive support in this pair, and the levels should continue to hold unless the oil markets can break out to the upside, causing demand for the Loonie. The market is still very nervous, and this always pushes demand for the Dollar overall.

The level above at 1.03 is minor resistance, and we think that it can be somewhat easily overcome, but the real test would be at the 1.07 level, as it would signify a massive breakout again. The pair would more than likely do this on bad oil prices more than anything else at this point in time. The lack of volume going forward due to the holiday season could exaggerate moves at times, so be mindful of that. However, the pair itself looks set for more of the same sideways and volatile grind going forward.

The breaking of the 1.07 level has us holding onto the buy side of this pair for some time, but to think that it will happen before 2012 might be asking a bit now. The volumes in several of the markets we follow is starting to dry up, and this is normally a sign that a lot of the big players in the markets are starting to wrap up for the year.

Looking at the near-term, we think selling between 1.05 and 1.07 is the prudent thing to do, and buying just above parity will serve you well for the time being. Of course there is always the chance of the above mentioned break out to either direction and those opportunities would present clearer trend-following trades going forward in what has been an overly choppy marketplace. The oil market will have to be watched, as the $100 level in Light Sweet Crude is the start of massive resistance, and this is the biggest thing working against the CAD at the moment. A break ing down of that market will send this one much, much higher.

USD/CAD Forecast Dec. 12th, 2011, Technical Analysis USD/CAD Forecast Dec. 12th, 2011, Technical Analysis

USD/CAD Forecast for the Week of Dec. 12th, 2011, Technical Analysis

The USD/CAD pair has been a very volatile pair over the last several months as the markets continue to weigh the economies around the world and the growth expectations. The oil markets are a big driver of this pair, and the oil markets are almost exclusively driven by economic activity. The pair has found massive support in the 1.01 area, and the support even runs down to the 0.99 level. The pair looks like it has broken out above the parity level recently, and the original fall from the 1.07 level crashed hard into the area. The resulting bounce didn’t quite make it as high, but the candle for the previous week has formed a hammer of sorts, and shows that the pair doesn’t want to give up the fight just yet.

Oil markets look very range bound at the moment, and this is part of the reason we are seeing such volatile yet nowhere moves in this pair. The world slowdown would have a massive effect on the consumption of oil, and this would serious dampen the demand for the Canadian dollar. It is because of this that we need to follow the strength of economies in such places as China. (After all, it is China that the trading world thinks is going to save the rest of us.) If we see serious degradation of global strength, this pair will continue to bounce higher.

For now, the 1.01 to 0.99 level seems to be massively supportive, and we are willing to buy from that area. The 1.07 above looks like it could be the first massive resistance point, so the market will more than likely find itself sitting between the two over the short run. With this in mind, we are buying this pair near the 1.01 level, and selling it when we get to 1.05 in the near-term. If we can get above the 1.07 level, this becomes a long-term buy and hold pair going forward. The pair is known for making large and sudden moves, so this could happen much quicker than many people think.

USD/CAD Forecast for the Week of Dec. 12th, 2011, Technical Analysis USD/CAD Forecast for the Week of Dec. 12th, 2011, Technical Analysis

USD/CAD Forecast Dec. 12, 2011, Fundamental Analysis

The USD/CAD pair rebounded to the downside on Friday, following optimism spread through markets after the European leaders were able to create a strong firepower to stop the debt crisis. Next week, all eyes will be on European leaders as they rush to finalize their comprehensive plan and act on measure implementation.

Traders will 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, especially with eyes wide-opened on the European bond auctions, hoping bond yields will fall this time after European leaders agreed to drop the private sector’s involvement in the cost of bailouts needed to safeguard the Europe’s indebted nations from falling down.

The USD/CAD pair could still drop if the optimism continues to dominate markets, but we still expect volatility to hold the steer for now, as uncertainty remains the main theme in markets, and that could also lead to deep fluctuations for the USD/CAD pair.

Monday December 12:

The United States will kick off next week with the monthly budget statement for November at 19:00 GMT, where the budget deficit could have narrowed to $140.0 billion from $150.4 billion.

USD/CAD Weekly Forecast Dec. 12-16, 2011, Fundamental Analysis

The USD/CAD pair rallied to the upside last week, as the U.S. dollar strengthened on mounting fears the European debt crisis is worsening, where yields on Italian bonds rose last week above 7%, a level that forced Greece, Ireland, and Portugal to seek bailouts, while yields on Spanish bonds also spiked last week, adding to fears that the debt crisis is spreading into other large economies within the euro zone.

Over the week, economic data from the United States basically showed better than expected economic progress, where the services sector activities continued to expand in November, while Chicago PMI rose above forecasts in November, which eased some of the concerns in markets over the outlook for growth in the world’s largest economy. Nonetheless, the worries over Europe remained the main theme around global financial markets.

Data from Canada last week showed that the building permits increased in October, but the housing starts decreased in November, while the Bank of Canada decided to keep the interest rates at 1.00%.

Important data will be released from Europe and the United States next week, where investors will look up the final process to be made by European nations, where we expect volatility to persist through the sessions this week, especially with eyes wide-opened on the European bond auctions. The Federal Open Market Committee (FOMC) rate decision will highlight this next week, where the Federal Reserve is expected to leave benchmark interest rates unchanged, especially with improvement cited actually in the U.S economy. Data from Canada will be cheap next week, with only manufacturing sales and leading indicators.

The high level of uncertainty in markets could provide the USD/CAD pair with more bullish momentum, where traders will be eyeing developments in Italy and Spain, and accordingly, we should expect Europe to dominate the pair’s movement next week. Nonetheless, if optimism spreads through markets, the USD/CAD pair will decline, as demand for higher yielding assets is likely to rise in that case, and that should provide the Canadian dollar with flow.

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

Monday December 12:

The United States will kick off next week with the monthly budget statement for November at 19:00 GMT, where the budget deficit could have narrowed to $140.0 billion from $150.4 billion.

Tuesday December 13:

The United States will join the session at 13:30 GMT with the retail sales index for November, where the advance retail sales index could have expanded by 0.6% from 0.5%, while the retail sales less Autos index could have advanced by 0.5% from 0.6%.

At 15:00 GMT, the United States will provide the business inventories index for October, which could have improved 0.4% from the previous stable reading.

At 19:15 GMT the Federal Open Market Committee (FOMC) will announce the rate decision (DEC 13), with expectations the Federal Bank could have kept the benchmark interest rates unchanged at 0.25%.

Wednesday December 14:

Canada will release the leading indicators for November at 13:30 GMT, which is expected to rise by 0.3% following the prior rise of 0.2% in October.

The United States will join the session at 13:30 GMT with the import price index for November, where the monthly index is expected to expand by 1.0% from the previous drop of 0.6%, while the annual index previous reading was 11.0%.

Thursday December 15:

The United States will join the session at 13:30 GMT with the producer price index for November, where the monthly PPI index is expected to expand by 0.2% from the previous drop of 0.3%, while the PPI excluding food and energy monthly index could have expanded by 0.2% from the previous steady reading, in the time the annual PPI index could have remained unchanged at 5.9%, and finally the annual PPI excluding food and energy could have lingered at 2.8%.

The United States will also release the Empire manufacturing index for December, which could have improved to 2.50 from 0.61.

Furthermore, the United States will also post the weekly jobless claims figure (DEC 10), which could have inclined to 390 thousand claims from 381 thousands.

At 14:00 GMT the United States will return with the TIC flows for October, where the net long-term TIC flows previous reading was $68.6 billion, while the total net TIC flows previous reading was 57.4 billion.

At 14:15 GMT the United States will release the Industrial production index for November, where the industrial production index could have expanded by 0.2% from 0.7%, while the capacity utilization index could improve to 77.9% from 77.8%.

At 15:00 GMT the United States will provide markets with the Philadelphia Federal District indicator, which could have improved to 5.0 from 3.6.

Friday December 16:

The United States will join the session at 13:30 GMT with the consumer price index for November, where the monthly index could have expanded by 0.1% from the prior drop of 0.1%, while the CPI excluding food and energy monthly index could have also improved by 0.1% from 0.1%, in the time the annual consumer price index is expected to remain unchanged at 3.5%, and finally the CPI excluding food and energy annual index is also projected to linger at 2.1%.

USD/CAD Forecast Dec. 9th, 2011, Technical Analysis

The USD/CAD pair skyrocketed during the session on Thursday as the “risk off” trade came back into the fray. The Canadian dollar is tied to the risk spectrum and highly sensitive to the price of oil, which fell hard during the session. The oil markets continue to be rocked by the problems in the EU, and the economic issues suggest that perhaps the world is going into a larger recession than originally thought.

The risk of contagion out of Europe has people buying US Treasuries and selling the commodity markets overall. The oil markets are still in the recent range, but did shed as much as $2 during the day. This pair looks like it has found massive support at the 1.01 level again, and at this point in time we think that this could be the start of a move higher, perhaps to the top of the recent range at the 1.07 mark. However, the 1.03 level is going to be resistive as well, and could cause a pullback in the process.

It is hard to imagine a scenario that the pair breaks below the 0.99 level, which is the absolute bottom of the support zone going down from the 1.01 level. The markets are far too jittery at the moment to think they will be willing to stick their collective necks out there like that and as a result we think that any move to the downside is extremely limited.

The oil markets will have to be watched, and the $95 level in the Light Sweet Crude contract is one place where we could see action that will lead this pair. If that level gives way – this pair will be running hard to the upside at that point. The $105 level in the Brent market will also be an area that Canadian dollar traders will be watching as well, and you should too. The markets certainly have plenty to worry about at the moment, and as a result we prefer to be on the long side of this pair as the Loonie looks vulnerable overall.

USD/CAD Forecast Dec. 9th, 2011, Technical Analysis USD/CAD Forecast Dec. 9th, 2011, Technical Analysis

USD/CAD Forecast Dec. 09, 2011, Fundamental Analysis

The USD/CAD pair rallied to the upside on Thursday, where the U.S. dollar strengthened despite the ECB’s announcement of more monetary easing, as the European Central Bank cut the benchmark interest rates by 25 basis points to 1.00% in line with forecasts and announced more nonstandard measures to ease tensions surrounding the European debt crisis. Nonetheless, the ECB stopped short from signaling quantitative easing, which weighed down on confidence ahead of the EU summit on Friday.

Moreover, Canada released the housing starts for November, where housing starts fell to 181.1 thousand, worse than median estimates of 200.0 thousand, which weighed down on the Canadian dollar, while the better than expected jobless claims failed to restore confidence, as the focus remained on today’s ECB rate cut and the EU summit on Friday.

Pessimism started to spread through markets ahead of the EU summit, where investors are starting to doubt the ability of EU leaders to come up with a resolution to the debt crisis. Accordingly, investors targeted lower yielding assets including the U.S. dollar, which put the Canadian dollar under pressure and pushed the USD/CAD pair to the upside.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where the focus will turn to the EU summit on Friday, and whether EU leaders will be able to craft a solution to the debt crisis in Europe.

The USD/CAD pair could extend its gains on Friday, since speculations continue to mount that EU leaders will fail to agree on measures to ease the debt crisis in Europe, but we still expect volatility to continue to dominate trading, as uncertainty remains the dominant theme in markets, and that could also lead to high levels of fluctuations for the USD/CAD pair.

Friday December 9:

Canada will release the international merchandise trade for October, where the trade surplus is expected to narrow to 0.60 billion Canadian dollars, from 1.25 billion CAD.

The United States will join the session at 13:30 GMT with the Trade Balance figures for October, which could have narrowed slightly to $13.0 billion from $13.1 billion.

At 14:55 GMT the United States will end the week with the University of Michigan Confidence figure for December in a preliminary reading, where the confidence is expected higher at 65.5 compared with the prior of 64.1.

**European Leaders Summit**

Fear Contagion – Who Is In Control In Europe

Fear is spreading throughout the markets today. Fear is spreading among government officials. Fear is spreading though business and corporations. Fear is spreading Bank to Bank.

With each hour, the possibility of a collapse of the EU becomes a stronger possibility. Merkel and Sarkozy, have an interesting proposition, a new treaty to solve future problems, but is it the right time to implement.

The markets are demanding immediate results and an immediate call to action. A new treaty however suggested, however presented will take a long time to implement and there is more and more concern that several countries will not be willing to sign such an agreement, many countries will need legislative approval, which could take a great deal of time. The question the markets are asking is how the EU will present a recovery plan when they do not have an agreement.

How will the ECB handle the situation, at present the Central Bank seems to have decided to act on their own, to implement a plan to protect the markets, avoid defaults and to maintain liquidity? The European Central Bank is expected to deliver its second rate cut in as many months on today. “The ECB will make no promises at its press conference on Thursday,” said Gilles Moec, economist at Deutsche Bank. European leaders need “to be as ambitious as possible on Friday. … Assuming a strong enough ambition and a broad enough consensus, we believe the ECB can increase its intervention thereafter.”

The hint has been credited with helping defuse tensions in the European bond market. Outright yields of Italian and Spanish government bonds have fallen sharply since Draghi’s remarks last Thursday, cutting the premium investors demand to hold peripheral government debt over German bonds.

Namely, investors will be looking for further clues that the central bank is willing to expand its bond-buying program after the ECB president last week told the European Parliament that “other elements might follow” if European leaders put together a credible “fiscal compact.”

With each passing moment, the likelihood of the euro failing becomes more and more inevitable; the likelihood of a breakup of the EU becomes a stronger possibility. The International Business Times reported the main news today was Germany trying to douse expectations for the EU Summit, via an anonymous official. That means that divisions remain and that European politicians may not be able to come together to agree on tough decisions in such a short timeframe.

Private and Public businesses are preparing themselves for the worse, the question is how do you prepare?

Gold  the safe haven has seen a rise on the daily chart and is currently trading at 1737.67 U.S. dollars per ounce, since the opening of trading at 1727.44 dollars an ounce. Oil has settled and is  trading near record highs, opening up to 101.25 dollars a barrel, and climbing since the opening of trading at levels of U.S. $ 101.31 a barrel.

Today’s Wall Street Journal: “An official said Germany was more pessimistic about the success of the summit than it was last week and said the European Financial Stability Facility and the permanent European Stability Mechanism, which is due to start in 2013, won’t run simultaneously, pouring cold water on earlier press reports. The official added that there were no additional resources planned for the ESM.”

Several economist say that this week’s meeting of the EU has the potentially of a make-or-break summit for the euro.

USD/CAD Forecast Dec. 8th, 2011, Technical Analysis

USD/CAD had a very neutral day on Wednesday as the market attempted to break the pair down below the 1.01 level and failed. The resulting daily candle was a doji, and finished just slightly positive. The oil markets are struggling to get over the current resistance levels, and as long as that is the case, we think this pair will be able to hold the current support level between 0.99 and 1.01. The candle sets up an easy trade – if we break the top of the Wednesday range, we would buy. We won’t sell down here as the 200 pip support level is just below.

USD/CAD Forecast Dec. 8th, 2011, Technical Analysis USD/CAD Forecast Dec. 8th, 2011, Technical Analysis

USD/CAD Forecast Dec. 08, 2011, Fundamental Analysis

The USD/CAD pair rebounded to the upside on Wednesday, where cautious trading continued to dominate markets ahead of the European Central Bank’s meeting on Thursday, where the ECB is widely expected to cut the benchmark interest rates by 25 basis points to 1.00%. Moreover, investors were careful ahead of the EU summit on Friday amid hopes EU leaders will announce strong measures to ease the euro zone debt crisis.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where the focus will turn to the ECB decision on interest rates and the conference that will follow the decision, as investors will be eyeing remarks by the ECB Chairman Mario Draghi and whether the ECB will loosen its monetary policy further in the future.

The USD/CAD pair could drop further on Thursday if the ECB manages to convince markets that it stands ready to help in easing the debt crisis in Europe, but we still expect volatility to continue to dominate trading, as uncertainty remains the dominant theme in markets, and that could also lead to high levels of fluctuations for the USD/CAD pair.

Thursday December 8:

The European Central Bank will start the session with the Interest Rates Decision for December, with expectation the Governing Council could have lowered the key rate to 1.00% from 1.25%.

Canada will release the housing starts for November at 13:15 GMT, which is expected to ease to 200.0K from 207.6K in October.

Canada will release the new housing price index for October at 13:30 GMT, where house prices rose 0.2% in September, while on yearly basis, house prices rose by 2.3% in September.

The United States will join the session at 13:30 GMT with the Initial Jobless Claims (DEC 2), noting that the previous figure was 402 thousand claims.

At 15:00 GMT the United States will provide markets with the Wholesale Inventories for October, which could have expanded by 0.4% from the prior drop of 0.1%.

USD/CAD Forecast Dec. 7th, 2011, Technical Analysis

USD/CAD fell hard on the session Tuesday as traders moved out on the risk trade a bit, especially in the afternoon in America. The pair has rested down near the 1.01 level, which has been supportive lately. The level is actually the start of a 200 pip zone of support going down to the 0.99 level. The next day or two could provide us some kind of supportive candle from which to buy. We are simply far too close to support to sell at this point, and truthfully believe this recent range should hold up anyways.

USD/CAD Forecast Dec. 7th, 2011, Technical Analysis USD/CAD Forecast Dec. 7th, 2011, Technical Analysis

USD/CAD Forecast Dec. 07, 2011, Fundamental Analysis

The USD/CAD pair dropped on Tuesday, despite the fears that continued to dominate global financial markets over the outlook of the European debt crisis after rating agency Standard & Poor’s announced it could downgrade the credit rating of 15 euro zone countries including Germany and France. Standard & Poor’s also signaled it could downgrade the credit rating of the European Financial Stability Facility EFSF.

Meanwhile, the Bank of Canada left the benchmark interest rates unchanged at 1.00% in line with median estimates, where the BOC signaled that the European debt crisis could weigh down on global economic growth. Nonetheless, the BOC signaled that rising economic activities in the United States represent a good sign for the outlook, since the United States is indeed Canada’s largest trading partner. Canada also released the Ivey PMI for November, which rose to 59.9, better than median estimates of 55.5, which also provided the Canadian dollar with some bullish momentum that pushed the USD/CAD pair to the downside.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where the focus will turn to the EU summit, as European leaders continue their efforts to find a resolution to the debt crisis.

The USD/CAD pair could still further on Wednesday, but we still expect volatility to continue to dominate trading, as uncertainty remains the dominant theme in markets, and that could also lead to high levels of fluctuations for the USD/CAD pair.

Wednesday December 7:

The United States will join the session at 20:00 GMT with the Consumer Credit figure for October, which could have declined to $7.000 billion from $7.386 billion.

USD/CAD Forecast Dec. 6th, 2011, Technical Analysis

USD/CAD had a relatively quiet day on Monday. The pair is highly sensitive to the oil markets as the Canadians export so much to the United States. The pair is often used as a proxy for oil by currency traders and as the oil markets were back and forth – so was this pair.

The biggest problem with trading this pair is that the two economies are so intertwined. The Canadians export over 80% of their goods to the US, and as the US economy goes, so does the Canadian one eventually. However, the pair does move quite suddenly once it breaks out of the common consolidation that this pair sees.

Currently, the 0.99 to parity level is massive support for this pair. As long as this pair can stay above that level, the bias is going to be to the upside over the long run. The US dollar and its “safe haven” status will continue to favor the Dollar as long as the world is so concerned with the situation in Europe, and the job markets continue to be soft in the USA. The trading world will buy Treasuries when the recessions hit, and as a result will be buying Dollars.

There is massive resistance in the 1.05 area, and that is where we will need to break through in order to get a serious rally going in this pair. Although we feel that the pair will have an upward bias, it looks like this pair could be range bound for the foreseeable future. Perhaps we will have to retest that area several more times before escaping the range.

The Monday candle is a hammer, and is sitting just above the 1.01 level, which has shown us some minor support lately. Although we don’t think of it as a major area, the breaking to the upside from the Monday range will be a very bullish sign as the buyers will have clearly been stepping in at that level. We don’t like selling, at least until we break below the 0.99 level, a couple of hundred pips below where we sit presently.

USD/CAD Forecast Dec. 6th, 2011, Technical Analysis USD/CAD Forecast Dec. 6th, 2011, Technical Analysis

USD/CAD Forecast Dec. 06, 2011, Fundamental Analysis

The USD/CAD pair fell to the downside on Monday, where optimism spread through global financial markets ahead of the ECB meeting and the EU summit later this week, where investors were hopeful that EU leaders can craft a plan to ease the worsening debt crisis inEurope.

The USD/CAD pair could fluctuate heavily on Tuesday, where the Bank of Canada will announce its decision on interest rates, as the BOC is expected to leave rates unchanged at 1.00%, yet investors will be eyeing the accompanying statement for clues over the BOC’s monetary policy path.

Traders will continue to monitor the developments from Europe regarding the debt crisis, where reports suggest thatGermanyandFrancereached an agreement on a plan to ease the European debt crisis. Nonetheless, tensions remain elevated in financial markets, as investors are concerned that EU leaders will fail to reach an agreement again after suffering similar disappointments over the past few months.

The USD/CAD pair could still drop if the current wave of optimism continues to dominate markets, but we still expect volatility to continue to dominate trading, as uncertainty remains the dominant theme in markets, and that could also lead to high levels of fluctuations for the USD/CAD pair.

Tuesday December 6:

Canadawill release the building permits index for October at 13:30 GMT, where building permits fell in September by 4.9%, and projections show building permits increased by 1.6% in October.

The Bank of Canada will announce its decision on interest rates, where the BOC is expected to leave the benchmark interest rate unchanged at 1.00%.

The Ivey PMI for November will be released at 15:00 GMT, which is expected to rise to 55.0 from 54.4 in October.

USD/CAD Forecast for the Week of December 5, 2011, Technical Analysis

USD/CAD had a very bearish week over the last 5 sessions, but did bounce a bit towards the end of the Friday session. It should be noted that the bounce was from the 1.01 level – the start of the support in the parity neighborhood. Because of this, we will need to see a strong break below the parity level in order to sell this pair. The bounce from here could have us buying though, as the USD is the “safe haven” trade at the moment, and there are a lot of headline risks out there. We are just as content with sitting on our hands though, as the two currencies and economies are so intertwined at times that it can be a very choppy pair.

USD/CAD Forecast for the Week of December 5, 2011, Technical Analysis USD/CAD Forecast for the Week of December 5, 2011, Technical Analysis

USD/CAD Forecast December 5, 2011, Technical Analysis

The USD/CAD pair had initially fallen in the wee hours of Friday before bouncing after the Non-Farm Payroll announcement. The markets produced a hammer for the session, and it currently sits on the 1.01 level – the start of the massive parity support area. The pair looks ready to bounce, and we would be willing to buy on a break of the highs form Friday. The selling of this pair will be difficult until after the 0.99 level is broken to the downside.

USD/CAD Forecast December 5, 2011, Technical Analysis USD/CAD Forecast December 5, 2011, Technical Analysis