Early September has been rough for USD/CAD backers. A strong daily downtrend has developed, resulting in a 5-day loss of more than 175 pips. At this point, rising WTI prices and stronger-than-expected Canadian economic metrics are driving the action. With rates moving steadily south, one has to wonder when the USD/CAD will find some solid ground.

During the U.S. pre-market hours, a couple of positive Canadian construction metrics came across the newswires. Here is a quick look at the data:

Event                                                     Actual   Projected   Previous

Housing Starts (YoY, August)            226.6K       215.0K        222.5K

Building Permits (MoM, July)            3.0%            2.3%           -3.1%

This collection of reports bodes well for the Canadian economic outlook. Both Housing Starts and Building Permits outperformed previous figures and projections. If nothing else, it appears investors are keen on going long Canada’s housing market.

The news has been well received, prompting an intraday reversal in the USD/CAD.

USD/CAD: Technical Outlook

In a series of Live Market Updates from last week, we broke down the importance of the 50% Macro Wave Retracement for the USD/CAD. After putting up a fight, that level has now been taken out ― the 62% Retracement is now in play at 1.3155.

Overview: At press time (about 11:00 AM EST), the heat is on the 62% Macro Wave Retracement (1.3155). This is a key area for the USD/CAD; if it fails as downside support, price is likely to plunge to the 1.3100 handle relatively quickly. Should this scenario play out, a test of the Double Bottom (1.3015-18) may set up for the near future.

Right now, the key number to keep an eye on is 1.3155. If we see a daily close beneath this level, a strong bearish bias is warranted moving into the weekly crude oil inventories reports.