Compare Interest Rate | US Dollar - Canadian Dollar Technical And Fundamental Forex Forecast For June

US Dollar / Canadian Dollar Technical Forecast

Weekly Chart

Prepared by Jamie Saettele

A look at the monthly reveals a harami candle pattern (reversal). Much similar to the AUDUSD and NZDUSD, the implications are for a one after another opposite direction pierce for June. Parallel duct lines are prospective insurgency areas as is the 9975 area (support in October and November 2010 and insurgency in Mar 2011). A pierce on top of 10057 is indispensable to be able to indicate that a leading low is in place (10057 is the 2011 high to date).

US Dollar / Canadian Dollar Interest Rate Forecast

A notable pullback in Bank of Canada interest rate expectations has coincided with a Canadian Dollar improvement (USDCAD rally). Overnight Index Swaps had formerly likely that the BoC would elevate its short-term interest rate by a accumulative 80 basement points in 12 months-among the highest of any G10 middle bank. Yet dovish middle bank narration put a coherent check on such bullish forecasts and the CAD pulled back as a result. The Loonie maintains a strong concede value against its US namesake, but a one after another mediation in BoC forecasts could create serve USDCAD bounces.

Otherwise it waste key to watch moves in Crude Oil prices, as the USDCAD interdependence to the NYMEX WTI stipulate trades nearby record-highs. Energy prices go on to combine after melancholy a break of new lows, and the next moves could be wilful is to USDCAD pair.

US Dollar / Canadian Dollar Valuation Forecast

USDCAD Valuation Forecast: Bullish

The Canadian Dollar proposed to scold a bit from overvalued domain in May but the mismatch between mark and the PPP-implied satisfactory swap rate waste fearful at 18.8 percent. Of all the majors, the supposed Loonie is the many sensitive to the implications of QE2 expiration: first, its close interdependence to the SP 500 means that the reply of market-wide chance feeling to the likely way up in US borrowing expenses will be mirrored in the USDCAD swap rate; second, Canadian mercantile expansion (and thereby its range for interest rate hikes) is keenly anchored to urge is to country’s exports from the US, so the grade to that aloft yields slow the liberation in the world’s top manage to buy will be vicious for its Northern neighbor. On balance, this seems point the way aloft for USDCAD, for certainly at least a few slack in US mercantile wake up is in the cards even if the liberation is not completely derailed (easily the more illusive scenario, in our opinion). This points the way descend is to SP 500 and slashes hopes for any near-term financial tightening on the segment of the Bank of Canada, apparently gap the doorway for USDCAD to go on to trim the stream gratefulness gap.

What is Purchasing Power Parity?

One of the oldest and many simple essential approaches to last the "fair" swap rate of one banking to another relies on the rational of Purchasing Power Parity. This draw close says that an same product should cost the same from one nation to another, with the usually difference in the cost label accounted for by the swap rate. For example, if a pencil expenses 1 in Europe and $1.20 in the US, the "fair" EURUSD swap rate should be 1.20. For our purposes, you will use the PPP values supposing annually by Bloomberg. We compare these values to stream marketplace rates to establish how sufficient any banking 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

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