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Canadian Dollar Test of Parity Could Come on Oil Breakout

Canadian Dollar Test of Parity Could Come on Oil Breakout

2010-03-25 19:43:00
John Rivera, Currency Analyst
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 1

BoC Interest Rate Expectations

Interest rate expectations for the BoC have held steady with markets pricing in a 100 bps in hikes over the next twelve months.  A rise in core consumer prices to 2.1% has raised speculation that the central bank may need to break their pledge of keeping rates on hold until June. An improving labor market and consumer demand is expected to continue to put upward pressure on prices. Expectations could get a boost from next week’s U.S. labor report as the world’s largest economy is expected to have added jobs in February. American demand has been the one element missing from the country’s recovery, and its return could significantly accelerate the pace of growth. Discuss this and trading ideas join the USD/CAD forum.

2

FOMC Interest Rate Expectations

A larger than expected decline in initial jobless claims have failed to change the outlook for U.S. interest rates, despite its implications for next week’s NFP report. Testimony from Fed Chairman Ben Bernanke to the House Financial Services Committee that “the economy continues to require the support of accommodative monetary policies,” helped keep expectations in check. Again, next week’s labor report will have a significant impact on the outlook for yields, as policy makers have pointed toward high unemployment as a reason to keep rates low. 

3

Oil

Oil gains were capped by a declining trend line as price action is developing a short-term wedge. Typically we see a breakout from this type of technical formation. Considering the pitfalls that lay ahead for the global economy a case for a bearish move could be made. However, improving fundamentals has continued to build optimism and a positive U.S. labor report could be the catalyst for a bullish break. If this were the case then a test of parity could be in store for the USD/CAD.  Discuss this and other fundamental data in the Economics Forum

4

To discuss this report or be added to the email list contact John Rivera, Currency Analyst: instructor@dailyfx.com

 

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