Forex Market Update

THEMES TO WATCH – UPCOMING SESSION

USD

As from our headline we are debating how long the dollar can stay supportive after Bernanke's testimony last week. he suggested that the present rate hike cycle has not yet had an impact of the US economy and that his stand is that he seems more concerned with a possible slowdown in the US then fighting inflation. If this is right we should see a significant slowdown in US house prices which has been supportive form the dollar through the last couple of years along with higher rates. So if this is actually the case which we believe there should no stopping a weaker dollar looking 3 months ahead.

CAD

CAD continued to disappoint the market with a lower then expected Retail Sales figure which came in at MoM -0.6% vs. 0.0% forecasted. These weak figures triggered a sell off in CAD and sent the USDCAD through the significant 114.00 lvls. For CAD bulls there seems to be no relief in sight as last week CPI figures eliminated the BoC tightening outlook in the near term and Canada’s economy slows. In this thin calendar week expect continue CAD weakness unless Wednesday Industrial Product Prices comes out higher then forecast.