DailyFX Plus Login

cad fundamentals

Article

Canadian Dollar Outlook Against US Dollar Muted on Crude Oil Tumbles
Friday, 02 January 2009 22:47:34 GMT  |  John Rivera, Currency Analyst
Delicious
Facebook

The Canadian Dollar ended the week virtually unchanged but saw significant volatility due to thin holiday trading and fluctuating oil prices. Global growth concerns an OPEC planned production cut and an unexpected rise in inventories led to seesaw price action in crude. A New Year’s Eve rally was saw as overdone and led to prices falling back by week’s end. The 20-Day and 50-Day SMA’s have provided resistance for the pair and have limited its upside potential.

Fundamental Outlook for Canadian Dollar: Bearish

-   Canadian Dollar January Forecasts Points To Further Weakness
 
The Canadian Dollar ended the week virtually unchanged but saw significant volatility due to thin holiday trading and fluctuating oil prices. Global growth concerns an OPEC planned production cut and an unexpected rise in inventories led to seesaw price action in crude. A New Year’s Eve rally was saw as overdone and led to prices falling back by week’s end. The 20-Day and 50-Day SMA’s have provided resistance for the pair and have limited its upside potential.
 
The upcoming week’s economic docket will be loaded with event risk for the “loonie’ with business activity, employment and housing data on tap. However, all of the fundamental data will cross the wires on Thursday and Friday leaving early week price up to broader fundamental data such as oil prices. The IVEY PMI is expected to fall to 37.5 from the record low it set last month of 40.2. Slowing global growth and its main trading partner the U.S. in a recession have led companies to retrench as expectations for future growth dwindle. Last month saw a sharp fall in inventory levels to 35.8 from 52.4 and employment to 42.2 from 48.5 as companies try and get lean. Further weakness in activity will continue to weigh on the labor market and growth to start 2009. Indeed, the Canadian economy is expected to have given back another 20,000 jobs in December following a loss of 70,600 the month prior, which was the most since 1982. A loss of 38,300 manufacturing jobs led the way and with activity in the country expected to drop we could see more than expected job losses. The unemployment rate is expected to rise to 6.5% from 6.3% which would be the highest since August, 2006.

Weakening business activity and mounting job losses may be enough to push the USD/CAD above technical resistance which could see it look to test psychological resistance at 1.2500. The January technical forecast is calling for an ultimate test of 1.300 before an extended move lower. However, the dollar may be facing a week of worse fundamental data and a broad based dollar sell of could offset the bearish Canadian dollar sentiment. - JR 

 

Visit our recently updated USD/CAD Currency Room for more resources dedicated to the Canadian Dollar.

More Articles

Feedback Form