USDCAD Consolidates As Canada Building Permits Fall, Oil Gains
USDCAD made quite a reversal last week as risk sentiment improved, but it is consolidating at the 50-daily SMA as fundamentals contradict.
USDCAD made quite a reversal last week as risk sentiment improved, but it is consolidating at the 50-daily SMA as fundamentals contradict. Crude Oil continues to remain bullish also helped by positive risk sentiment, which is positive for the CAD, while the economy of Canada is weakening and the Bank of Canada has already started to cut interest rates.
USD/CAD Chart Daily – The 50 SMA Is Holding As Support
After a strong bullish start to July with a 3.5-cent gain, USDCAD turned bearish on Monday and continued to decline over the next four days. The Bank of Canada’s dovish move to cut its policy interest rate by 25 basis points, from 4.75% to 4.5%, initially supported the pair’s upward momentum. However, this strength has diminished as global risk sentiment now drives financial markets. Since Monday, USDCAD has reversed course, losing over two cents.
Expectations for the Federal Reserve to lower rates by 25 basis points in September, rather than 50 basis points, and to ease rates by 98 basis points by the end of the year, have led the market to gradually scale back its aggressive expectations. The market is now fully pricing in a 25 bps cut from the Bank of Canada in September, with a total of 73 bps of easing expected by year-end, however the BOC has already lowered rates by 25 bps as we mentioned above.
The global stock market meltdown last Monday pushed USD/CAD above the 1.3850 resistance level, reaching a peak just above it on the daily chart. However, as market sentiment stabilized, those gains were quickly given up. Sellers took advantage of each dip below, driving the price down to 1.3717, where it found support at the daily chart’s 50 SMA (yellow). Over the past two days, attempts by traders to break below this moving average have been unsuccessful, which is a positive sign for USD/CAD buyers. However, they will be looking for a swift price rebound off the 50 SMA. Today, Canada’s building permits data showed a significant decline, despite the country’s rapidly growing population due to immigration.
Canadian Building Permits Data for July 2024
- Canada July 2024 building permits decreased by 13.9%, significantly missing the expected +6.6%.
- Previous month’s data was revised from -12.2% to -12.7%.
- Total permits were valued at $9.9 billion, down from $11.6 billion in the prior month.
- Residential permits declined by 11.5% to $6.5 billion, driven mainly by a drop in multi-unit permits.
- Single-family home permits rose by 4.0% month-over-month.
- Non-residential permits fell by 18.1%, following a 21.3% increase in May.
Canadian building permits have seen another monthly declines of -12.7%, after the -13.9% decline in the previous month, signaling a sharp downturn in the market. Particularly in Ontario and British Columbia, multi-unit residential sales have dropped significantly, with decreases of 25.7% and 31.1% month-over-month, respectively, indicating that the condo boom has come to an end. When adjusted for inflation, spending is now notably below 2019 levels.
USD/CAD Live Chart
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