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Canadian Dollar Remains Elevated as Housing Starts Rise

H.S. Borji
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Canadian Dollar Remains Elevated as Housing Starts Rise

The Canadian dollar edged higher Wednesday as housing starts unexpectedly rose in the latest sign the housing market may be overbuilt.

The loonie, as Canada’s currency is called, climbed 0.07 percent to 0.9372 US.

The USDCAD pair tumbled 0.07 percent to 1.0670. The pair is likely supported at 1.0659. Initial resistance is likely found at 1.0696.

The CADJPY advanced 0.21 percent to 95.31. The pair is testing initial resistance at 95.35, with support likely found at 94.95.

The loonie advanced against the British pound, as the GBPCAD tumbled 0.22 percent to 1.8250. Initial support is likely found at 1.8247 and resistance at 1.8331.
The EURCAD declined 0.1 percent to 1.4521. The trend line shows initial support at 1.4509 and resistance at 1.4556.

In economic data, Canadian housing starts unexpectedly rose in June, defying the market’s expectations for a soft landing. Groundbreaking climbed to a seasonally adjusted annual rate of 198,185, a seven-month high, the Canadian Mortgage and Housing Corporation reported today.

The figure was well above the median estimate of economists, which called for a decline to 189,000.

“The trend in housing starts has been stable since March 2014, down from the range of 191,000 to 196,000 seen between September 2013 and February 2014,” said CMHC chief economist Bob Dugan. “This is in line with CMHC’s analysis indicating that the new home construction market in Canada is headed for a soft landing in 2014.”

Urban single-unit starts rose 5.4 percent in June, while multiple-unit projects declined 0.8 percent. Rural starts declined 3.8 percent, CMHC showed.
“Builders are expected to continue to manage their building activity to ensure that demand from buyers seeking a new unit is channeled toward unsold units, whether these are under construction or completed,” Dugan added.

The June figures continued to go against the grain of conventional reasoning, which says the housing market would cool in 2014 as declining affordability and rising home ownership rates take hold.

Housing starts have been gradually rebounding from the near five-year low of 157,500 in March, which was likely related to unusually severe weather. The Canadian economy expanded just 0.3 percent in the first quarter and 1.2 percent annually, as inclement weather weighed on household consumption, business spending and government spending.

Economists expect the rebound in housing starts to positively impact second quarter GDP estimates.

Statistics Canada on Thursday will report on new house prices for the month of May. The price of new homes in Canada is forecast to have increased 0.3 percent in May, following a 0.2 percent gain the previous month.

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