Forex – USD/CAD weekly outlook: 03-07 October 2011

Forex News – The U.S. dollar ended the week sharply higher against its Canadian counterpart on Friday, as renewed worries over the euro zone debt crisis and the global outlook boosted demand for safer assets.

USD/CAD hit 1.0502 on Friday, the pair's highest since September 8, 2010; the pair subsequently consolidated at 1.0500 by close of trade on Friday, climbing 2.12% over the week.

The pair is likely to find support at 1.0223, the low of September 23 and resistance at 1.0568, the high of September 3, 2010.

The U.S. dollar found strong support on Friday, as risk appetite was hit after an unexpected rise in euro zone inflation for September dampened hopes that the European Central Bank will cut interest rates to boost the region's economy.

Elsewhere, private sector data showed that China's manufacturing sector contracted for the third consecutive month in September, adding to concerns over the global outlook.

Also Friday, government data showed that consumer spending in the U.S. rose 0.2% in August after a revised 0.7% increase the previous month.

The report came after data on Thursday showed that the U.S. economy grew more than previously estimated in the second quarter. In its final estimate for the quarter, the Commerce Department said gross domestic product grew at annual rate of 1.3%, up from the previously estimated 1.0%.

Meanwhile, Statistics Canada said on Thursday that the raw materials price index fell more-than-expected in August, dropping 3.2% after a 1.1% decline the previous month.

On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD78.64 a barrel by close of trade on Friday, the lowest settlement price since September 29, 2010. The November contract declined 1.3% over the week.

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

In the coming week, markets will be closely watching the outcome of Thursday’s policy-setting meeting by the ECB as well as developments in Greece. Meanwhile, Friday’s data on U.S. non-farm payrolls will also be a major focus for the week, as well as Canadian data on building permits and manufacturing activity.

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

Monday, October 3

The U.S. Institute of Supply Management is to publish data on manufacturing activity.

Tuesday, October 4

The U.S. is to release official data on factory orders, a leading indicator of production, while Federal Reserve Chairman Ben Bernanke is to speak in Washington.

Wednesday, October 5

The U.S. is to release a report on non-farm payrolls, compiled by payroll processing firm ADP, which leads government data by two days.

Meanwhile, the ISM is to produce a report on service sector activity, a leading indicator of economic health. The U.S. is also to release government data on crude oil inventories. The data can be a big market mover for the loonie, due to the size of Canada's energy sector.

Thursday, October 6

Canada is to produce official data on building permits as well as a report on manufacturing activity, a leading indicator of economic health.

Meanwhile, the U.S. is to release its weekly report on initial jobless claims.

Friday, October 7

Canada is to produce government data on employment change and the unemployment rate, leading indicators of economic health.

The U.S. is to round up the week with the monthly report on non-farm payrolls, which is a leading indicator of job creation. The country is also to publish official data on the unemployment rate and average hourly earnings.