USDCAD Resumes Uptrend as the BOC Plans More Rate Cuts

The Canadian dollar (CAD) has been weakening throughout September, with the USDCAD pair rising by about 2 cents from its August lows, breaking above the 1.36 level. This decline is largely driven by ongoing pressure from the strengthening U.S. dollar and growing economic concerns weighing on the CAD. While a 22% surge in building permits offered some support to the tight Canadian real estate market, it did little to reverse the upward trend of the USDCAD.

The Bank of Canada (BoC) recently lowered interest rates by 25 basis points for the third consecutive time, keeping the CAD under pressure. There are expectations that the BoC may further reduce rates by 50 basis points at the next meeting, particularly as Governor Macklem hinted that monetary easing could accelerate if economic data continues to warrant it. Yesterday, USD/CAD faced some selling pressure, dropping to test the key support around 1.3560.

USD/CAD Chart H4 – The 20 SMA Held As Support

However, the decline was limited, and the stochastic indicator has moved into oversold territory, signaling a potential rebound. The first resistance target stands around the 1.3620 level. The BoC’s dovish stance, in response to challenges in the Canadian housing market, partly due to high immigration and economic stagnation, has contributed to this weakness. In an effort to address housing pressures, the government is reportedly issuing more building permits.

Canada Building Permits for July

• Canada July Building Permits: Increased by 22.1%, significantly exceeding the 7.1% estimate.
• Previous Month’s Permits: Initially reported as -13.9%, later revised to -13.0%.
• Surge in Permits: The 22.1% rise in July building permits indicates a strong rebound following the sharp decline in the prior month.
• Higher-than-Expected Growth: The reported figure outpaced expectations, showcasing a potential boost to the real estate and construction sectors in Canada.
• Market Impact: Despite the significant rise, broader economic concerns limited the positive influence on the Canadian dollar.

USD/CAD Live Chart