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The Loonie trades flat despite the release of strong housing numbers

CAD - Canadian Dollar

The Loonie trades slightly lower this morning due to the risk-off mood, where North American equity futures opened lower. Furthermore, crude oil prices have lost some momentum, trading flat. Housing starts in Canada increased in August however.

According to the Canada Mortgage and Housing Corporation, there were higher trending single-detached starts in urban centers in July and August, following roughly a year of decline. Additionally, there were higher-trending multi-family units in August, which pushed the total starts trend to its highest level since June 2018. The trend in housing starts was 218,998 units in August 2019, compared to 208,931 units in July 2019.

On top of that, building permits in July 2019 came in at 3 percent, higher than the expectation of 2.1 percent. The value of building permits issued by Canadian municipalities rose 3 percent to $8.3 billion in July, which was largely due to increases in multi-family and commercial permits. Gains were reported in five provinces, with over one-third of the national rise taking place in British Columbia.

The USD/CAD might resume its short term downtrend (stronger Loonie); however, there is a strong support level around 1.3125 and 1.3040. The USD/CAD pair is trading at 1.3160 at this moment. The USD/CAD pair would need to break through a long-term uptrend support that comes from September 2017 and October 2018 to call a change in the long-term uptrend. In summary, the USD/CAD might fall in the short-term and rise in the long-term if market participants "respect" key technical levels.

Key Movers

One of the most critical movers this week is the European Central Bank, which will meet this Thursday to consider lowering its interest rate on deposits, which has stood at -0.4 percent since 2016. The U.S. dollar might be at the mercy of the decision in Europe, and Trump will likely follow through with his opinion on Twitter; get the popcorn ready!

The British Pound has continued in a rally mode since July, including after U.K. Prime Minister Boris Johnson met Irish Prime Minister Leo Varadkar in Dublin last Monday. However, Johnson's bid to force an early election on Oct 15th was rejected again in one of Parliament's last acts before the five-week shutdown. Johnson succeeded in getting Parliament closed until Oct 14th, and promised to work to make a new deal with the European Union at the Oct 17th summit in Brussels. The GBP/USD pair rises 0.12 percent to 1.2348, and the GBP/CAD pair increases 0.1 percent to 1.6285.

China's inflation has probably remained subdued enough in August to give the PBOC a free hand for further stimulus. Additionally, according to data compiled by the IMF, concerns about global trade have reached nearly ten times the peaks seen in previous decades and could shave about 0.75 percentage point off world economic growth this year.

Expected Ranges

USD/CAD: 1.3117 - 1.3164 ▼

EUR/CAD: 1.4498 - 1.4580 ▼

GBP/CAD: 1.6209 - 1.6330 ▲

AUD/CAD: 0.8990 - 0.9047 ▼

NZD/CAD: 0.8423 - 0.8491 ▼