USDCAD to Break Above 1.40, After Dip on Higher Canadian Building Permits Gets Bought
Skerdian Meta•Tuesday, November 12, 2024•2 min read
USDCAD failed at the 1.3960 resistance once again today, taking a dip after the jump in Canadian building permits, but has returned to it pretty quickly, which indicates strong buying momentum. This forex pair dipped 40 pips lower after the strong data, but the price remains supported and buyers jumped right back, showing that this pair will likely push above 1.40 soon.
Since late September, the USD/CAD pair has been trending upward, gaining around 5 cents. However, in November, this momentum has moderated, and the price has entered a consolidation phase. Attempts to break through the initial resistance zone at 1.3950-60 have repeatedly failed, and it has yet to surpass the key 1.40 level, facing consistent rejection at these levels.
Despite this, buyers re-enter after each dip, with higher lows indicating that pullbacks are becoming increasingly shallow. This pattern highlights the persistence of buyers, and with recent weak data from the Canadian economy—such as last week’s labor report showing job gains well below forecasts—it’s likely the 1.40 level will be breached soon. The Bank of Canada’s dovish stance, coupled with expectations for further rate cuts following its latest 50 basis point reduction, adds support to this view.
USD/CAD Chart H4 – The 100 SMA Held as Support Yesterday
Today, Canada’s building permits report showed a surge, reflecting the nation’s housing shortage exacerbated by high immigration rates relative to its population. The USD/CAD pair dipped slightly after this report, but found support at the 50 SMA (yellow) on the H4 chart, and is now bouncing back as buyers make another attempt to clear the initial resistance zone.
Canada September Building Permits:
Rose by 11.5% compared to the expected 1.7% increase
Previous month’s figure revised slightly from -7.0% to -6.3%
Permit Breakdown:
Non-residential Permits: Up by 18.0% to CAD 5.2 billion
Residential Permits: Increased by 7.5% to CAD 7.7 billion
Regional and Sector Highlights:
Ontario: Leads growth with a 25% rise in both residential and non-residential permits
Institutional Building Permits: Spiked by 85.9% month-over-month, mainly driven by healthcare-related construction projects
Institutional Sector Gains: Increased by CAD 824.9 million, despite small declines in other areas
Industrial Permits: Dipped by CAD 17.6 million
Commercial Permits: Slight decrease of CAD 9.9 million
Industrial Projects: Remain high due to significant projects like the battery plant in St. Thomas, Ontario
September saw building permits reach their second-highest level since January 2017, though this increase appears to be driven more by government initiatives than by underlying economic factors. In Ontario, major contributions came from a new hospital permit in Prince Edward County and several new long-term care facilities across the province, giving a substantial boost to the institutional component of permit activity.
In the residential sector, single-family housing activity has slowed, while multi-family construction remains strong. The steady flow in the condo construction pipeline is helping to sustain elevated levels in multi-family residential permits, even as single-family developments have plateaued.
Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.