Last trading week was not great for the Canadian dollar (CAD) as the currency fell against some majors, including the US dollar and the Japanese yen, but gained versus the euro. What outlook analysts do have for this week?
The most important event this week is the presidential election in the United States. The problem is that not only the outcome, but market reaction to it as well, is hard to predict. Last weekâs US macroeconomic reports, especially nonfarm payrolls, were positive for risk appetite and the positive sentiment will likely remain in place this week.
Europe, on the other hand, remains a negative factor as the future of Greece and Spain is still unclear. Canada is fortunate to have the USA as a main trading partner, not the European Union, therefore Europeâs troubles have smaller impact on CAD. But the pessimism, caused by the inability of the European leaders to handle their problems, is still a major threat to commodity currencies, including Canadaâs one. That should help the Canadian currency gain on the euro, but will likely weaken it against other majors, especially safer ones.
Fundamentals in Canada itself are the real drawback for CAD. Last weekâs employment report showed just minor growth by 1,800 in October from September, compared to the expected change of 9,500 and the September increase of 52,100. This weekâs reports are not expected to be much better. Building permits already showed a drop by as much as 13.2 percent in September, noticeably worse than the expected decrease by 2.6 percent. Other data should be unfavorable as well, including falling Purchasing Managersâ Index and increasing trade balance deficit, according to economistsâ predictions.
All in all, there are not many reasons to be bullish on CAD, though it may retain some of its previous strength. In fact, most analysts, like Forex Crunch and Action Forex, are neutral on CAD with some bearish bias. DailyFX believe that fundamentals are positive for the currency, but the technical analysis shows that CAD should weaken versus USD.
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