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US Dollar - Canadian Dollar Technical and Fundamental Forex Forecast for May

US Dollar - Canadian Dollar Technical and Fundamental Forex Forecast for May

2011-05-12 00:21:00
Joel Kruger, David Rodriguez,
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US Dollar / Canadian Dollar Monthly Technical Forecast

Weekly Chart

us_dollar_canadian_dollar_technical_fundamental_forecast_body_cad.png, US Dollar - Canadian Dollar Technical and Fundamental Forex Forecast for May

Prepared by Joel Kruger

The market remains confined to a very well defined downtrend off of the 2010 highs and will need to break back above 1.0000 at a minimum to force a shift in the overall structure. However, we are seeing some shorter-term signs of a potential base by 0.9450, with an impressive bullish reversal week in early May. Back below 0.9450 would delay recovery prospects.

US Dollar / Canadian Dollar Interest Rate Forecast

Currency, Central Bank

US Dollar, US Federal Reserve

Canadian Dollar, Bank of Canada

Net USDCAD Spread

Signal

1-Year Expectations(Basis Points)

32

80

(48)

Bearish

Yield in 1 Year(Percent)

0.57

1.80

(1.23)

Bearish

us_dollar_canadian_dollar_technical_fundamental_forecast_body_Picture_4.png, US Dollar - Canadian Dollar Technical and Fundamental Forex Forecast for May

Markets predict that the Bank of Canada will raise interest rates by a cumulative 80 basis points in the coming twelve months, among the most bullish expectations for any central bank in the G10. Along with robust crude oil price rallies, interest rate expectations have supported Canadian Dollar strength against its US namesake. A key question is whether the BoC will follow through with market expectations and raise rates in the face of incredible Canadian Dollar strength.

We most recently saw a noteworthy pullback in BoC rate forecasts which coincided with a USDCAD bounce. It remains important to watch moves in interest rate expectations and commodity prices for the crude oil-linked Canadian Dollar. Recent Bank of Canada Core Consumer Price Index inflation figures remain just narrowly below the central bank’s target at 2.0 percent. It will be significant to watch trends in the closely-watched economic indicator.

Written by David Rodriguez, Quantitative Strategist and Joel Kruger, Technical Strategist for http://www.DailyFX.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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