After an extended period of consolidation, the Canadian dollar finally broke higher at the end of last week thanks to global improvements in investor sentiment, a surge in carry trades, and a jump in oil. In fact, all of the Canadian dollar’s 1.3 percent weekly rally occurred on Friday. There has been little in the way of economic data for the commodity dollars lately, but that will change this week.
Fundamental Outlook for Canadian Dollar: Bullish
- FXCM SSI correctly suggested that the Canadian dollar would rally against the US Dollar
- The Canadian dollar finally breaks out from 1.0550 - 1.0800 range on USD weakness, rise in oil
After an extended period of consolidation, the Canadian dollar finally broke higher at the end of last week thanks to global improvements in investor sentiment, a surge in carry trades, and a jump in oil. In fact, all of the Canadian dollar’s 1.3 percent weekly rally occurred on Friday. There has been little in the way of economic data for the commodity dollars lately, but that will change this week.
On Monday, Canadian retail sales are expected to rise 0.3 percent, though there is potential for a surprisingly strong reading given the surge in Canadian wholesales sales, which tends to be a decent leading indicator. The Canadian economy has proven to be rather resilient in the face of the US economic slowdown, as domestic demand has yet to falter. On Tuesday, Canadian CPI for the month of August is anticipated to rise to an annualized pace of 3.5 percent – a more than 5 year high – while the Bank of Canada’s core CPI may hold steady at 1.5 percent. However, there is potential for the headline reading to reflect softer inflation pressures given the broad decline in commodity prices during the survey period, and this surprise factor could weigh on the Loonie. Overall though, there remain downside risks for USD/CAD, as price action in the US dollar along with oil are likely to determine the pairs next move.
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