Strong Oil Inventories Could Push USD/CAD to 3-month Lows
The Canadian dollar gained traction on Tuesday despite weaker than expected housing data released in Canada. On Wednesday the US Department of Energy will release its inventory data which could help drive the Canadian dollar to 3-month highs. Later today the Federal Reserve will release minutes from its prior FOMC meeting.
On Tuesday the Canadian dollar notched up a 3-month high despite a housing report that showed weaker than expected starts and permits. Housing starts fell 17.7 percent in March to annualized rate of 156,823 units, well below an economists’ forecast for 191,000 units.
Building permits worth $6.1 billion in February were down 11.6% from January, according to Statistics Canada. It added this decrease followed an 8.1% gain the previous month and was mainly driven by lower construction intentions for multi-family dwellings in all provinces.
At 10:30 EST on Wednesday the Department of Energy will release data on petroleum inventories. The Canadian dollar is highly correlated to the movements of crude oil and a bullish report could help drive the USDCAD below support levels.
The FOMC meets later Wednesday. The minutes are not likely to be as hawkish as the market’s initial reaction suggested. Yellen repeated several times at her press conference that there was no intent to signal a change in stance or outlook. That being said, any information that is more dovish than expected could tilt the advantage to the Canadian dollar and also help push the currency pair below support.
The USDCAD moved below support levels and is poised to test the highs near 1.07. Momentum is negative with the MACD (moving average convergence divergence) index printing in negative territory with a downward sloping trajectory. The RSI moved lower with price action reflecting accelerating negative momentum while printing near 35, which is on the lower end of the neutral range.
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