USD/CAD Slips Despite Strong Building Permit Data

On Wednesday, the dollar edged lower than the Loonie and weaker against most major currencies. The move comes despite stronger than expected housing data. Traders took profits on their short-positions in Treasury yields, allowing the curve’s long end and short end to ease. In December, U.S. building permits jumped 9.1% as pend up demand buoyed housing starts.

Technical Analysis

The USD/CAD edged lower and is hovering just below the 200-day moving average which was former support. Resistance is seen near the 10-day moving average at 1.2570. The 10-day moving average crossed below the 50-day moving average, which means a short-term downtrend is in place. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The exchange rate is oversold as the fast stochastic prints a reading of 11, below the oversold trigger level of 20. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in negative territory with a downward sloping trajectory which points to a lower exchange rate.

Building Permits Surge

Permits for future homebuilding jumped 9.1% to a rate of 1.873 million units in December. Permits for buildings with five units or more soared 19.9% to a rate of 675,000 units. Single-family building permits rose 2.0% to a rate of 1.128 million units. Housing starts rose 1.4% to a an annual rate of 1.702 million units last month, the highest level since March.