USD/CAD: Trading the Canadian Housing Starts

 The Canadian Housing Starts indicator is considered by analysts as a good measure of consumer demand in the housing sector. As a house is likely to be the largest purchase that a consumer will make, this indicator provides critical data about the mood of consumers and the health of the economy.

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

Published on Tuesday at 12:15 GMT.

Indicator Background

The Housing Starts Report is a key leading indicator, as the housing sector is an important component of the economy. A higher reading than that forecast may push the loonie higher against the US dollar.

After an upward trend for several months, the indicator slipped in September, surprising the markets with a reading of 185K, despite a forecast of 200K. October’s forecast is for 187K, almost unchanged from September’s figures.

Sentiment and Levels

September employment figures were very strong,  providing a nice boost to the loonie. The Canadian economy is showing some signs of growth, which does not seem to be the case south of the border. So, the overall sentiment is bearish on USD/CAD towards this release.

Technical levels from top to bottom: 1.0360, 1.03, 1.02, 1.0080, .9915 and .9780.

5 Scenarios

1. Within expectations: 175K to 195K: In this scenario, USD/CAD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
2. Above expectations: 196K to 205K: A reading above expectations would be another strong indication of growth in the Canadian economy, and could push the pair below one support level.
3. Well above expectations: Above 205K: A sharp rise in housing starts will likely propel the pair downwards, and two levels of support or more can be broken.
4. Below expectations: 164K to 174K: A lower than expected reading could push USD/CAD upwards, with one resistance level at risk.
5. Well below expectations: Below 164K: A poor reading will hurt confidence in the loonie, and the pair could break two resistance levels.

 For more on USD/CAD, see the Canadian dollar forecast.