The Loonie Loses Ground As Canadian Housing Starts Declined In October

By Trang Nguyen,

THE TAKEAWAY: Canadian Housing Starts Declined in October > Starts in Urban Areas Fell > Canadian Dollar weakens

Canada Mortgage and Housing Corp. reported today that Canadian housing starts declined 0.6 percent to 207,600 at a seasonally adjusted annual pace in October from an upwardly revised 208,800 in August. From a year prior, the nation’s dwelling starts advanced 20.6 percent. The figure, however, tops the median forecasts as economists polled by Bloomberg survey had only called for a gain of only 195,000. While the number of new building permits plummeted 4.9 percent for the third straight month in September, the housing starts falling again last month after picking up in September points to weakening housing situation. Though currently low interest rate seems to be apparel to homebuilders, housing market has softened in Canada due to its slow economic growth rate. Gross domestic products expanded at a modest pace of 0.3 percent in August, after shrinking during April-June period.

Canadian Housing Starts (Monthly Change): January 2010 to Present

Prepared by Trang Nguyen

Better-than-anticipated dwelling starts figure for October was triggered by significant surge in rural areas. Housing constructions in rural areas edged up 13.2 percent to 23,100 after slightly advancing 0.1 percent in the previous month. On the contrary, starts in urban areas retreated 2.1 percent to 184,500 after climbing 9.4 percent to 188,400 in September, led by a dramatic fall in single-family starts. Single-family starts dropped 9 percent to 60,900 while multi-family starts grew merely 1.7 percent to 123,600 in the month, compared to 17.6 percent gain the preceding month. On the regional basis, Ontario, Prairie registered the strongest increase. Specifically, starts in Ontario increased to 41,400 from 32,300 in September and starts in Prairie moved up to 41,400 from 32,300. Reversely, starts in Quebec area dramatically slumped to 37,400 in October from 52,500 a month earlier.

CAD/USD 1-minute Chart: November 8, 2011

Charts created using Strategy Trader – Prepared by Trang Nguyen

Canadian dollar weakens versus most of its major trading partners, except its Australian trading partners. As can be seen from the 1-minute USDCAD chart above, the currency pair rapidly hiked 25 pips from 1.0135 to 1.0155 following the release. The Relative Strength Indicator rose above 70 to the overbought territory, signaling that that foreign exchange trading crowd was massively buying the greenback while cutting their loonie holdings. At the time this report was written, the Canada’s dollar drop to C$1.01398 per greenback in Toronto.

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email [e-mail]

DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/market_alert/2011/11/08/110811_Canada_Housing_Starts_October.html

>To order reprints of this article, click here: Reprints