Fundamental Analysis

The USD/CAD pair rose on Monday, as worries over debt problems in the United States and Europe continued to dominate traders, where pessimism spread through global financial markets, which pushed demand for lower yielding assets including the USD, and accordingly, the USD/CAD pair rose to the upside. Moreover, falling crude oil prices weighed down on the CAD, which provided the USD/CAD pair with more bullish momentum to rise on Monday. The Bank of Canada will announce its decision on interest rates on Tuesday, where expectations signal that the BOC will leave rates unchanged at 1.00%, and that should be the major highlight for the day, however, investors will be still focused on the latest developments regarding the debt problems in Europe and the U.S., and that could still provide the pair with more bullish momentum on Tuesday. Tuesday July 19: At 12:30 GMT, Canada will release the Leading Indicators index for the month of June, where it’s expected to rise by 0.8%, compared...

Swissy fluctuated heavily versus the dollar on Monday as the USD/CHF started the week with a strong bearish gap on the back of rising pessimism and strong swissy haven demand that is buoyed to keep the franc favored for more gains. The franc rallied to a new historic record versus the euro amid rising fears over the stability of the euro area and the spillover of the crisis on global markets and growth, which is further suppressing the sentiment and increasing haven demand. We still see swissy favored for more gains even amid the risk that the SNB might intervene to curb the gains. The focus is on the euro area leaders to come up with a suitable solution for Greece and to prevent the risk of the spillover as the tension in financial markets rise and takes yields to record high pressuring other nations further. On Tuesday the gains are likely to remain evident for swissy on haven demand especially with the...

The GBP/USD moved south on Monday with sterling still weak and extending the losses to a stronger dollar amid risk aversion and bleak outlook for both nations which still kept the dollar on stronger grounds. Investors are worried over the deepening debt crisis in Europe and the debt problems in the United States with the Congressional leaders unable to reach an agreement on raising the debt ceiling, and the weak sentiment surely powered risk aversion and keep the dollar favored over sterling. The weak global environment is a constant reminder of the fragile conditions in the United Kingdom and Ernst & Young UTEM Club on Monday revised again their growth estimates for UK to the downside to 1.4% this year from 1.8% which was further downside pressure on sterling. On Tuesday, the focus will remain on the fragile sentiment in the market amid high doubt that the EU leaders will find a suitable and sustainable solution for the worsening debt crisis and stem...

The EUR/USD started the week on Monday with continued bearishness amid rising pessimism and skepticism that the euro area leaders will be able to resolve the deepening debt crisis. Investors were downbeat on the prospects of a near-term solution to the Greek agony that is threatening the overall stability of the euro area and financial markets globally with the risk of contagion rising as the leaders stall in a solution. The focus turned now to the euro area leaders’ summit in Brussels on July 21 where investors had little hope that a new solution is to be proposed. The market also continued to react to the stress test results where eight lenders fell short of minimum requirements and 16 others need to bolster capital further. Fears over the deadlock in the United States over raising the debt ceiling also persists which is further intensifying risk aversion and keeping the pessimism strong. The EUR/USD on Tuesday will be haunted by the same negativity and...

Borrrrrrrrrrrrrrrrrrrrrrrrrrrrrring!! Overnight markets are again characterised by a combination of independent EUR weakness and generally diminishing appetite for risk. Although off the low ($1.4015), EUR/USD is still 100 pips down from Friday’s close. Ostensibly, EUR weakness is attributed to the limited credibility of Friday’s bank stress tests and is mirrored in wider peripheral spreads (Italy +13 bps; Spain +20 bps). More generally, equities are soft (US futures -0.6%), leaving JPY the top performing currency in G-10, with USD not far behind. SEK is the worst performer, though this has more to do with general risk appetite than the Riksbank minutes, which added little to the policy debate. White House and Republican leaders appear to have made little progress over the weekend in striking a deal to raise the debt limit, which is also weighing on risk sentiment. The House plans to vote on July 19th to increase the debt ceiling. Press reports suggest that President Obama has already moved to the...

The USD/JPY pair traded near its lowest level in four months, as the EU debt crisis fueled risk aversion which increased demand for lower yielding currencies, opening the way for the Japanese currency to keep its gain against the dollar. The Japanese yen faced more pressure since it traded near its highest levels against the dollar since the intervention, fueling concerns that the BOJ may act again to prevent the yen from further gains. The recent fundamentals from the Japanese economy helped the yen to find more buyers, as the GDP and industrial productions figures came better than expected, increasing signs of recovery from the March 11 quake. The U.S. economy will release on Tuesday at 12:30 GMT the housing starts index for June, where the previous reading was at 560 thousand and expected to show a rise of 2.5% to 574 thousand. The building permits index is expected to drop by 1.5% to 600 thousand from 612 thousand.

The first day trading of this week was positive for the New Zealand currency (Kiwi), especially versus the US dollar, as the New Zealand economy reported higher than expected second quarter inflation, increasing the speculation that the RBNZ is to increase interest rates in the upcoming period. The inflation showed the economy needs to increase interest rates during the coming period, while the annualized CPI increased to exceed the Bank’s target, supporting the NZ policy maker to move to raise the borrowing costs, where the rates are probably going to go up faster than we previously thought which is obviously supportive for the New Zealand dollar. The New Zealand economy expanded more than expected during the first quarter, signaling the nation’s economic recovery passed the natural disasters that hit the economy in first quarter, where the economy has many resources that help the recovery. On the other hand, the investors still seeking more data to reduce fears that dominating the market after the...

The fears still dominate the market after the US failed to reach agreement on raising the debt ceiling and the European debt crisis escalated, supporting the haven demand and damping the appeal of higher yielding currencies. The Australian dollar continues its downside movement for a third day in a row on speculation the European policy makers are unable to resolve the debt crisis that threatens the global economy. Regarding the situation in Australia, the economic growth continues its expansion, but the recovery will face more obstacles in second half of the year, and the central bank is still aiming to revitalize the recovery. The RBA’s board decided this month to leave the rates steady at 4.75% to support the economy escape recession after the first quarter contraction. On Tuesday, The Reserve Bank of Australia will release its July minutes at 01:30 GMT for the last meeting when the central bank kept interest rate steady at 4.75%. The statement already reflected the dovish stance...

The AUD/NZD pair retreated to the lowest in 11 months, as the New Zealand dollar grabbed traders' attention after the New Zealand economy showed more signs of recovery, increasing demand for Kiwi. The New Zealand second quarter CPI increased more than expectations, increasing the speculation that the RBNZ is to increase interest rates in the upcoming period. On the other hand, the Australian dollar continues its downside movement for a third day in a row on speculation the European policy makers won’t be able to resolve the debt crisis that threatens the global economy. The cheerful data from the New Zealand economy and the risk aversion in the market helped the New Zealand currency to control the AUD/NZD pair. Expectations still support further downside movement for the pair as long as the current sentiment prevails favoring kiwi over aussie. On Tuesday, The Reserve Bank of Australia will release its July minutes at 01:30 GMT for the last meeting when the central bank kept interest...

USD/CAD dipped into lower ground in the past week. The rate decision, BOC Press Conference, inflation data and retail sales are the highlights of a busy week. Here's an outlook for the Canadian events, and an updated technical analysis for USD/CAD. Last week Canadian housing starts rose unexpectedly amid strong sales activity in Ontario reaching 197,400 new building starts following 194,000 inthe previous month. The prosperous housing market continues to thrive despite the restrictions on mortgage lending issued at the beginning of 2011. USD/CAD daily chart with support and resistance lines on it. Let's Start: Foreign Securities Purchases: Monday, 12:30. Foreign investors continued to buy Canadian securities totaling $8.2 billion in April and following 6.44 billion in the previous month.  A decrease to $7.41 billion is forecasted. Rate decision: Tuesday, 13:00. The Bank of Canada maintained its target overnight rate at 1% due to a gradual recovery in the global economy and in the Canadian market expansion. However announced in its last rate statement it would closely monitor inflationary pressures...