We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
USD/JPY
Mixed
Gold
Bearish
Oil - US Crude
Mixed
Bitcoin
Bullish
More View more
Breaking news

ECB leaves all rates unchanged in line with expectations

Real Time News
  • $USDCAD had shot-up to test resistance in a prior zone of support after the Friday employment releases, and sellers have since come back to re-test monthly lows following yesterday’s #FOMC rate decision. More from @JStanleyFX here:https://t.co/QuRR2gnJT8 https://t.co/EnGJyGzOIG
  • US 30-Year Bonds Draw 2.307% Primary Dealers Awarded: 15.5% Direct Bidders Awarded: 21.1% Indirect Bidders Awarded: 63.4% B/C Ratio: 2.46
  • LIVE NOW: Join @JStanleyFX as he runs through price action set-ups for the FX and CFDs market. https://www.dailyfx.com/registerToSeminar?webinar=3952937094787220994&utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • here we go, starting now -> https://www.dailyfx.com/webinars/643096611 https://t.co/bNQQ0K2hwF
  • LIVE IN 5 MINUTES: Join @JStanleyFX as he runs through price action set-ups for the FX and CFDs market. https://www.dailyfx.com/registerToSeminar?webinar=3952937094787220994&utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • Trump to discuss China trade issues with advisers this afternoon -BBG
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.67%, while traders in France 40 are at opposite extremes with 77.30%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/tfwztUY3jx
  • LIVE IN 15 MINUTES: Join @JStanleyFX as he runs through price action set-ups for the FX and CFDs market. https://www.dailyfx.com/registerToSeminar?webinar=3952937094787220994&utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • BOC's Poloz: - Some regions continue to struggle in Canada - Insidious effect from trade uncertainty $CAD
  • BOC's Poloz: - Household debt is the most important vulnerability to financial system - Low rates globally are likely to continue $CAD
US Dollar - Canadian Dollar Technical and Fundamental Forex Forecast for June

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

2011-06-07 18:15:00
David Rodriguez, Jamie Saettele, CMT, Ilya Spivak,
Share:

US Dollar / Canadian DollarTechnical Forecast

Weekly Chart

060711_us_dollar_canadian_dollar_technical_and_fundamental_forecast_june_body_usdcad.png, US Dollar - Canadian Dollar Technical and Fundamental Forex Forecast for June

Prepared by Jamie Saettele

A look at the monthly reveals a harami candle pattern (reversal). Much like the AUDUSD and NZDUSD, the implications are for a continued counter trend move for June. Parallel channel lines are potential resistance areas as is the 9975 area (support in October and November 2010 and resistance in March 2011). A move above 10057 is needed in order to suggest that a major low is in place (10057 is the 2011 high to date).

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)

18

55

(37)

Bearish

Yield in 1 Year(Percent)

0.43

1.55

(1.12)

Bearish

060711_us_dollar_canadian_dollar_technical_and_fundamental_forecast_june_body_Picture_4.png, US Dollar - Canadian Dollar Technical and Fundamental Forex Forecast for June

A noteworthy pullback in Bank of Canada interest rate expectations has coincided with a Canadian Dollar correction (USDCAD rally). Overnight Index Swaps had previously predicted that the BoC would raise its short-term interest rate by a cumulative 80 basis points in 12 months—among the highest of any G10 central bank. Yet dovish central bank commentary put a clear damper on such bullish forecasts and the CAD pulled back as a result. The Loonie maintains a healthy yield advantage against its US namesake, but a continued moderation in BoC forecasts could produce further USDCAD bounces.

Otherwise it remains key to watch moves in Crude Oil prices, as the USDCAD correlation to the NYMEX WTI contract trades near record-highs. Energy prices continue to consolidate after threatening a break of recent lows, and the next moves could be decisive for the USDCAD pair.

US Dollar / Canadian Dollar Valuation Forecast

USDCAD Valuation Forecast: Bullish

060711_us_dollar_canadian_dollar_technical_and_fundamental_forecast_june_body_06072011_CAD.png, US Dollar - Canadian Dollar Technical and Fundamental Forex Forecast for June

The Canadian Dollar started to correct a bit from overvalued territory in May but the disparity between spot and the PPP-implied fair exchange rate remains formidable at 18.8 percent. Of all the majors, the so-called Loonie is the most sensitive to the implications of QE2 expiration: first, its intimate correlation to the S&P 500 means that the response of market-wide risk sentiment to the likely rise in US borrowing costs will be mirrored in the USDCAD exchange rate; second, Canadian economic growth (and thereby its scope for interest rate hikes) is closely anchored to demand for the country’s exports from the US, so the degree to which higher yields slow the recovery in the world’s top economy will be critical for its Northern neighbor. On balance, this seems point the way higher for USDCAD, for surely at least some slowdown in US economic activity is in the cards even if the recovery is not altogether derailed (easily the more probable scenario, in our opinion). This points the way lower for the S&P 500 and slashes hopes for any near-term monetary tightening on the part of the Bank of Canada, seemingly opening the door for USDCAD to continue to trim the current valuation gap.

What is Purchasing Power Parity?

One of the oldest and most basic fundamental approaches to determining the “fair” exchange rate of one currency to another relies on the concept of Purchasing Power Parity. This approach says that an identical product should cost the same from one country to another, with the only difference in the price tag accounted for by the exchange rate. For example, if a pencil costs €1 in Europe and $1.20 in the US, the “fair” EURUSD exchange rate should be 1.20. For our purposes, we will use the PPP values provided annually by Bloomberg. We compare these values to current market rates to determine how much each currency is under- or over-valued against the US Dollar

Written by Jamie Saettele, CMT, Sr. Technical Strategist; David Rodriguez, Quantitative Strategist; and Ilya Spivak, Currency Strategist for DailyFX.com

We always want to hear your feedback on DailyFX articles. Want more content like this? Less? What do you want to see? Send e-mails to drodriguez@dailyfx.com, ispivak@dailyfx.comand jsaettele@dailyfx.com.

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

DISCLOSURES

News & Analysis at your fingertips.