The Canadian dollar strengthened yesterday, and is now trading above oversold conditions. Previously, we warned that the currency was likely to enjoy a relief rally as the currency weakened sharply. Looking at economic data, housing starts and build permits helped the Canadian dollar yesterday. Both data points were higher than expectations, suggesting that Canada's critical housing sector remains strong. Given the growth of consumer mortgage debt in recent history, there are concerns that the housing sector is due for a slowdown. Yesterday's data suggests that the slowdown has yet to come. Recent strength in crude oil is also supporting the currency, given the significance of the commodity for the economy. Later today, we will upgrade our short-term outlook on the Canadian dollar to bullish.
The USD/CAD exchange rate is currently above 1.2720. The euro has been flat against the Canadian dollar. EUR/CAD is currently above 1.4750. Lastly, the pound is down against the Canadian dollar, with GBP/CAD trading above 1.6680.
Beyond a Bank of Canada speech and press event, this is a pretty light week for the Canadian dollar economic calendar. On Monday, Ivey PMIs were higher than the last print (63.8 vs. 59.6 prior). On Tuesday, Governor Poloz remained "cautious" in his outlook for future rate hikes in a speech in Montreal. October housing starts (222.8k vs. 210k expected) and build permits (3.8% vs. -0.2% expectations) were both strong. Later today, we’ll see the New Housing Price Index for September. Last week, trade balance figures and unemployment numbers missed expectations.
As the Canadian dollar rebounds from oversold conditions, we are upgrading the Canadian dollar to bullish in the short-term. Looking at various technical indicators on a daily chart of the Canadian dollar, the currency is now trading within normal conditions in the short-term.
As the Canadian dollar rebounds thanks to strengthening crude oil prices, we are now neutral on the currency in the medium-term. Looking at a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators on the Canadian dollar currency index.