Weekly Fundamentals: Canadian dollar lagged behind

retreated as a risk on mood is affecting the markets in the summer. Elections in Japan, US housing data, durable goods orders and weekly jobless claims among other events are expected to move markets this week.
Dollar and Yen Lower as Bernanke lifted risk appetite. Yen weakened broadly in a rather dull week even though there were many events. Markets were back into risk seeking mode after Fed chairman Bernanke's semi annual testimony. DOW and S&P 500 closed at new record high of 15543.74 and 1692.09 respectively. Strong risk appetite helped yen cross extended recent choppy recovery. The dollar was second weakest major currency last week, partly because pull back in US treasury yields continued. Bounded in prior week's range except versus sterling, which was lifted by the BoE minutes.
Canadian dollar lagged behind other commodity currencies and fell versus others except dollar and yen. Dollar’s near term outlook against European majors remained mildly bearish in spite of some consolidative price actions last week. We'd favor further downside in the greenback against Euro, Sterling and Swiss. The greenback also seemed to have bottomed against Aussie and Kiwi already while USD/CAD's outlook stayed bearish. So except versus yen, more downside is expected in dollar.

EURR/USD remained stable, ignoring some euro-zone issues and enjoying some dollar weakness. Flash Manufacturing and Services PMIs and German Ifo Business Climate are the main events on our calendar. Here is an outlook on the important events to watch and an updated technical analysis for EUR/USD.

German ZEW dropped 2.2 points to 36.3, missing economists’ expectations. Weak German industrial production and foreign trade contributed to this fall. Furthermore, trouble from the east threaten to jeopardize Germany’s economic recovery; The slowdown in China, can hinder Germany’s growth prospects for the coming months. In addition, jobs figures were but housing was weak.

AUD/USD resistance removed together with the Chinese floor on its lending rate.
The Chinese central bank announced that it is removing the floor on the lending rate. This monetary loosening is certainly helpful for the Australian and New Zealand dollars.
AUD/USD broke above the 0.9190 level that capped it in the past few days and peaked at 0.9234 so far. 0.9250 is the next target. The People’s Bank of China was expected to take some steps to aid the banks after they allowed for a credit crunch back in June. This move aims to help lower company funding costs. Banks will now be allowed to set rates according to commercial principles. Despite the significant move, the Chinese authorities pledged to keep a close watch on markets and to assess the situation on a day by day basis.

The pound finally broke out with a strong week, as GBP/USD climbed 140 points. The pair closed just above the 1.5000 line. This week’s key events include CPI, Claimant Count Change, and Retail Sales. Here is an outlook of the events and an updated technical analysis for GBP/USD.
The pound had a strong week, posting gains against the dollar. However, this rise was due to the broad weakness of the dollar rather than strength in the pound. The British currency jumped on the bandwagon as the US Federal Reserve cooled down expectations of QE tapering, sending the greenback lower against the major currencies.

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The Canadian dollar posted strong gains against the US dollar this week, as USD/CAD dropped about two cents. This week’s major events include Manufacturing Sales, the BOC Overnight Rate and Core CPI. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The Canadian dollar took advantage of the US dollar’s broad weakness last week, as the Fed appeared to put QE tapering on hold. The loonie was also helped by another strong Housing Starts release.

Important events this week
· Existing- Home Sales, an economic indicator of both the number and prices of existing single-family homes, condos and co-op sales over a one-month period.
·Core Retail Sales m/m, US Unemployment Claims and Core Retail Sales m/m from Canada and Retail Sales from the UK on focus.
· New Zealand balance of trade
· French Flash Manufacturing PMI, an estimate of the Manufacturing Purchasing Managers' Index (PMI) for a country.
· New Home Sales, an economic indicator that measures sales of newly built homes.
· Official Cash Rate, The Reserve Bank manages monetary policy to maintain price stability, promotes the maintenance of a sound and efficient financial system, and supplies New Zealand banknotes and coins.
· German Ifo Business Climate, A key monthly survey that measures the business climate.
· Core Durable Goods Orders m/m, Change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items. Unemployment Claims, The number of individuals who filed for unemployment insurance for the first time during the past week.