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USD/CAD: Trading the US New Home Sales

The US New Home Sales report is a leading indicator for measuring activity in the  housing sector, a critical component of the economy. A higher reading than the market forecast is bullish for the US dollar.

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

Published on  Wednesday at 14:00 GMT.

Indicator Background

The Existing Homes Sales Report measures the number of new single-family homes sold the previous month. An increase in home sales  is  an indication of stronger consumer spending and confidence in the economy.

The  indicator had a strong  April, with a reading of 328K. This exceeded the market estimate of 321K. The market is expecting better figures in May, with a forecast of 335K. Will the indicator continue its upswing this month?

 Sentiments and levels

Although  the Canadian dollar is relatively resilient to events in Europe, the US dollar has been  surging against most major currencies, and the loonie is no exception.   Recent weak figures from the US, such as the Philly Fed Index, could mean less US demand, which is critical to the growth of the Canadian economy. So, the sentiment is  neutral on USD/CAD towards this release.

Technical levels, from top to bottom: 1.03, 1.0263, 1.02, 1.0143, 1.0050 and 1.0030.

5 Scenarios    

  1. Within expectations: 331K to 339K: In such a case, USD/CAD is likely to move within range, with a small chance of breaking higher.
  2. Above expectations: 340K to 344K: An unexpected higher reading can push USD/CAD  above one resistance line.
  3. Well above expectations: Above 344K: A sharp increase could result in the pair breaking two or more resistance lines.
  4. Below expectations: 326K to 330K: A reading lower than forecast could send USD/CAD  below one  support level.
  5. Well below expectations: Below 326K: A sharp decline would signal weakness in the housing sector. In such an outcome, the pair could  drop below  two or more  support levels.

For more on the loonie, see USD/CAD forecast.