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Loonie at 50-DAY MA on Strong US Housing Starts

Market Analysis


The U.S. housing starts report beat estimates with big January gains for starts and permits after a small December starts boost, and a smaller than expected January completions decline. U.S. housing starts climbed 9.7% to 1.326 mln in January after falling 6.9% to 1.209 mln in December (revised from 1.192 mln). The surprisingly big gains were led by multi-family units and activity in the northeast, where possibly had some “catch up” before month-end after a cold start to January and a weak Q4 for the region, as Q4 activity was skewed toward the south and west. Meanwhile, in Canada, Manufacturing shipments released as well, presenting a fall to 0.3% in December after  a revised 3.8% gain in November. The decline in shipments was contrary to expectations for a modest gain (median +0.5%). A 4.1% pull-back in petroleum and coal product shipments, alongside a 2.6% drop in food industry shipments drove the slippage in total shipment values during December.  Today’s report joins the somewhat disappointing December trade figures (export volumes dipped 0.2%) and the very disappointing 88.0k plunge in January employment.

The dollar was a few ticks higher after the stronger housing starts and firmer import price data. EURUSD edged into 1.2430 N.Y. session lows, as USDJPY topped at 106.30. However, the biggest mover is the USDCAD, which perked up by nearly 50 pips, reaching the strong resistance at 50-DAY SMA, at 1.2550. Today, the pair rebounded from 1.2445 lows,  broke the 20-period SMA in the 4-hour chart and it is currently moving to the upper Bollinger Bands pattern. Technical Indicators provide a mix overview of the Loonie, with MACD still negative, RSI is neutral while Stochastic sloping positively but it is still  close to the oversold territory.

Nevertheless, if the pair closes today above the 1.2550 level , which was found as a strong support area for 5 consecutive day, between February 8 to February 13 , then this could suggest that bulls are gaining back the control of the pair. Therefore, the pair could retest Feburary’s highs. Next Resistance levels are at 1.2590 and 1.2625. Support comes at 1.2440.

Conversely, the pair might be seen in a consolidation mode,, since both 50 and 200 period SMA have been flattered.

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Andria Pichidi

Market Analyst


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