Forex - USD/CAD weekly outlook: August 22 - 26

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Forexpros - Last week saw the Canadian dollar decline against its U.S. counterpart for the fourth consecutive week, as mounting concerns over the U.S. economic outlook and lingering fears over the euro zone's sovereign debt crisis curbed demand for growth-linked currencies.

USD/CAD hit 0.9937 on Thursday, the highest since August 11; the pair subsequently consolidated at 0.9900 by close of trade on Friday, gaining 0.3% on the week.

The pair is likely to find support at 0.9774, Wednesday's low and resistance at 0.9968, the high of August 11.

The Canadian dollar trimmed losses on Friday after Bank of Canada Governor Mark Carney testified before the House of Commons Finance Committee that Canadian economic growth will accelerate in the second half of the year, "led by business investment and household expenditures."

Carney added that "several downside risks" have been realized since the BOC's July policy-setting meeting, including a "deepening of Europe's debt crisis and the persistent strength of the Canadian dollar."

Meanwhile, official data showed that Canadian consumer price inflation slowed to 2.7% in July from 3.1% in the previous month, broadly in line with market expectations.

Core inflation, which excludes volatile items such as gasoline, accelerated to 1.6% in July from 1.3% in June, also in line with expectations.

The loonie dropped sharply on Thursday after a flurry of weak U.S. data fuelled speculation the economic recovery of Canada's largest trade partner was stalling.

Among the disappointing U.S. economic reports was data on existing home sales and weekly jobless claims, which both came in below market expectations, while an index of manufacturing activity in the Philadelphia-region plunged to the lowest level since March 2009 in August.

The loonie was also weighed as crude oil, Canada's largest export, posted its fourth consecutive weekly decline on the New York Mercantile Exchange, dropping 3.65% last week to trade at USD82.74 a barrel by close of trade on Friday.

Raw materials, including oil account for about half of Canada's export revenue.

Looking ahead, speculation that Federal Reserve Chairman Ben Bernanke may use the Jackson Hole symposium to announce additional measures to support the U.S. economy seem likely to continue to weigh on market sentiment.

Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.

Monday, August 22

The U.S. is to publish data on mortgage delinquencies, a sign of health in the housing market.

Tuesday, August 23

Canada is to publish government data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.

Meanwhile, the U.S. is to release official data on new home sales, a leading indicator of economic health.

Wednesday, August 24

The U.S. is to publish government data on durable goods orders, a leading indicator of production. The country is also to publish data on crude oil inventories.

The U.S. crude supplies report can be a big market mover for the Canadian dollar, due to the size of Canada's energy sector.

Thursday, August 25

The U.S. is to publish government data on initial jobless claims, a leading indicator of economic health.

Thursday is also the first day of the annual global economic symposium in Jackson Hole, Wyoming.

Friday, August 26

The U.S. is to publish preliminary data on GDP, a leading indicator of economic growth, while the University of Michigan is to release revised data on consumer sentiment and inflation expectations.

Meanwhile, Fed Chair Ben Bernanke is to speak at the second day of the economic symposium in Jackson Hole.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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