USD/CAD Fundamental Analysis
Closing out a volatile trading week, worries over Greece, the fiscal cliff and a flat consumer sentiment are seen to buoy demand for the safety asset US dollar over its North American dollar counterpart, the Canadian Loonie. Market euphoria over a Barack Obama re-election proved to be short-lived as Wall Street turned their focus to the looming fiscal cliff as well as a fiscal stalemate.
Even with anxiety over Greece defaulting on a 5-Billion Euro debt payment due next week, Euro Zone officials have yet to finalize the new program, which would extend the Greek rescue by two years to 2016. Such would free up a long-delayed 31.3-Billion Euro aid payment desperately sought by Athens. However, negotiations remain askew on how much debt relief for Greece is needed and who will bear the losses from lower debt repayments.
“We’re not out of the woods yet,” German Finance Minister Wolfgang Schaeuble said in Hamburg yesterday. “I don’t see how we can take the decision already next week.”
Asian shares extended their losses, while European shares opened flat on uncertainty. Risk confidence is believed to be on a low, heading to the market close for the week.
Back on American soil, analysts price in a bearish open after ratings agency Standard and Poor’s stated yesterday it sees an increasing chance – now 15 percent – that the US will go over the fiscal cliff. It is still believed though that policy makers would arrive at a compromise in time to avoid most of the effects of the dreaded fiscal cliff.
Further, a preliminary reading on consumer sentiment by the University of Michigan is forecast to hold steady this month. The joint survey by Reuters and the University of Michigan is estimated by economists to register at 82.6 points this November. Though likely to remain at a strong level, a slight decline is expected after consumer confidence soared to 83.1 points, the highest since September 2007.
Risk aversion would probably reign in market exchanges today on anxieties over the Greece and the fiscal cliff. Hence, a buy bias is advised for the Greenback-Loonie today. Technical price corrections are still likely to ensue.
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