USD/CAD: Trading the Canadian Building Permits January 2012

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The Canadian Building Permits indicator measures the change in the number of new building approvals issued. It provides a good indication of activity in the construction sector, as obtaining a building permit is one of the first steps taken in the construction of a new building. A reading that is higher than the market prediction is bullish for the Canadian dollar.

Here are all the details, and 5 possible outcomes for USD/CAD.

Published on Monday at 13:30 GMT.

Indicator Background

An increase in building permits indicates an expansion of construction activity, which in turn is a critical component of economic growth. Conversely, negative readings indicates a contraction in building activity.

The indicator tends to fluctuate sharply from month to month,which results in market forecasts that are usually well off the mark. The December reading climbed to 11.9%, well above the forecast of 2.3%. The strong reading was also welcome news in that it marked the first reading in postive territory since August of last year. However, the forecast for the January reading is down to -3.1%. Will the indicator prove the markets wrong yet again?

Sentiments and levels

The increase in oil prices and stronger economic data in the US are positive factors for the Canadian dollar. However, unemployment figures continue to be a worry, and could hamper economic growth. Thus, the overall sentiment is bullish on USD/CAD towards this release.

Technical levels, from top to bottom: 1.0430, 1.0360, 1.03, 1.0263, 1.02, 1.0143 and 1.0050.

5 Scenarios

Within expectations: -4.5% to -1.5%: In such a case, USD/CAD is likely to rise within range, with a small chance of breaking higher.

Above expectations: -1.4% to 0%: An unexpected higher reading can send USD/CAD above one support line.

Well above expectations: Above 0%: A reading in positive territory would prop up the loonie, and a second support line might be broken as a result.

Below expectations: -6.0% to -4.6%: A sharper decrease than forecast could push the pair above one line of resistance.

Well below expectations: Below 6.0%: A negative reading much lower than forecast will cause USD/CAD t0 rise, possibly breaking a second resistance level.

For more about the Canadian dollar, see the USD to CAD forecast.

Get the 5 most predictable currency pairs

About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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