Yesterday’s trade saw USD/CAD within the range of 1.1932-1.2117. The daily high has also been the highest level since April 29th 2009. The pair closed at 1.2114, gaining 1.47% on a daily basis.
At 8:20 GMT today USD/CAD was down 0.17% for the day to trade at 1.2091. The pair touched a daily low at 1.2074 at 7:00 GMT.
Fundamentals
United States
Housing Starts, Building Permits
The number of housing starts in the United States probably increased to 1.040 million in December from the seasonally adjusted annual rate of 1.028 million during the prior month. Novembers figure has been influenced by a 5.4% drop in single-family homes. Single-family housing starts in November were at a rate of 677 000, or 5.4% below the revised figure of 716 000 in October. The November rate for units in buildings with five units or more was 340 000, according to data by the US Census Bureau.
Housing Starts represent a gauge to measure residential units, on which construction has already begun, every month. A start in construction is defined as the foundation laying of a building and it encompasses residential housing primarily.
The number of building permits in the country probably increased to 1.058 million in December from an unrevised annual level of 1.035 million in November. Octobers number of permits, or 1.080 million, has been the highest in six and a half years. Single-family authorizations in November were at a rate of 639 000, or 1.2% below the revised number of 647 000 in October. Authorizations of units in buildings with five units or more were at a rate of 367 000 in November, according to the report by the Census Bureau.
Building permits are permits, issued in order to allow excavation. An increase in the number of building permits and housing starts usually occurs a few months after mortgage rates in the country have been reduced. Permits are not required in all regions of the United States. Building permits, as an indicator, provide information regarding demand in the US housing market. In case a higher-than-anticipated figure is reported, this will certainly support the greenback. The official housing data is due out at 13:30 GMT.
Canada
Bank of Canada policy decision
Bank of Canada’s (BoC) Governing Council probably left the target for the benchmark interest rate (overnight rate) without change at 1.0% at its policy meeting today, according to expectations. At its meeting on December 3rd the central bank left the Bank Rate unchanged at 1.25% and the deposit rate at 0.75%.
According to the most recent BoC Statement, ”Inflation has risen by more than expected. The increase in inflation over the past year is largely due to the temporary effects of a lower Canadian dollar and some sector-specific factors, notably telecommunications and meat prices. Underlying inflation has edged up but remains below 2 percent.
”Canadas economy is showing signs of a broadening recovery. Stronger exports are beginning to be reflected in increased business investment and employment. This suggests that the hoped-for sequence of rebuilding that will lead to balanced and self-sustaining growth may finally have begun. However, the lower profile for oil and certain other commodity prices will weigh on the Canadian economy.”
”While inflation is at a higher starting point relative to the October MPR, weaker oil prices pose an important downside risk to the inflation profile. This is tempered by a stronger U.S. economy, Canadian dollar depreciation, and recent federal fiscal measures. Household imbalances, meanwhile, present a significant risk to financial stability. Overall, the balance of risks remains within the zone for which the current stance of monetary policy is appropriate and therefore the target for the overnight rate remains at 1 per cent.”
Short-term interest rates are of utmost importance for the valuation of national currencies. In case Bank of Canada is hawkish about inflationary pressure and overall economic activity and, thus, decides to introduce a rate hike, this will usually provide support to the loonie. Respectively, a decision (maintaining or cutting the benchmark rate), a result of a more dovish view on economic development, will usually have a bearish effect on the national currency.
The official policy decision is scheduled to be announced at 15:00 GMT.
Recession seen
Canadian economy will probably plunge into recession before the middle of 2015, Thomas Costerg, Standard Chartered Bank economist, wrote in a note to clients yesterday, as reported by Bloomberg. The expert projects that the nations economy will probably expand at a pace of 0.5% in 2015 and by 2.4% during 2014. Todays decision on policy will set the stage for a reduction of 50 basis points (0.50 percentage point) at the March 4th meeting, in case economic data continue to disappoint, according to Costerg.
Bank of Canada “Governor Poloz’s tone will probably indicate mounting worries about the falling oil price”, according to the note.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.2054. In case USD/CAD manages to breach the first resistance level at 1.2177, it will probably continue up to test 1.2239. In case the second key resistance is broken, the pair will probably attempt to advance to 1.2362.
If USD/CAD manages to breach the first key support at 1.1992, it will probably continue to slide and test 1.1869. With this second key support broken, the movement to the downside will probably continue to 1.1807.
The mid-Pivot levels for today are as follows: M1 – 1.1838, M2 – 1.1931, M3 – 1.2023, M4 – 1.2126, M5 – 1.2208, M6 – 1.2301.
In weekly terms, the central pivot point is at 1.1943. The three key resistance levels are as follows: R1 – 1.2088, R2 – 1.2190, R3 – 1.2335. The three key support levels are: S1 – 1.1841, S2 – 1.1696, S3 – 1.1594.
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