USD/CAD: Trading the US New Home Sales
The US New Home Sales report is a leading indicator for measuring activity in the housing sector, a critical component of the economy. A higher reading than the market forecast is bullish for the US dollar.
Here are all the details, and 5 possible outcomes for USD/CAD.
Published on Wednesday at 14:00 GMT.
Indicator Background
The Existing Homes Sales Report measures the number of new single-family homes sold the previous month. An increase in home sales is an indication of stronger consumer spending and confidence in the economy.
The indicator had a strong April, with a reading of 328K. This exceeded the market estimate of 321K. The market is expecting better figures in May, with a forecast of 335K. Will the indicator continue its upswing this month?
Sentiments and levels
Although the Canadian dollar is relatively resilient to events in Europe, the US dollar has been surging against most major currencies, and the loonie is no exception. Recent weak figures from the US, such as the Philly Fed Index, could mean less US demand, which is critical to the growth of the Canadian economy. So, the sentiment is neutral on USD/CAD towards this release.
Technical levels, from top to bottom: 1.03, 1.0263, 1.02, 1.0143, 1.0050 and 1.0030.
5 Scenarios
- Within expectations: 331K to 339K: In such a case, USD/CAD is likely to move within range, with a small chance of breaking higher.
- Above expectations: 340K to 344K: An unexpected higher reading can push USD/CAD above one resistance line.
- Well above expectations: Above 344K: A sharp increase could result in the pair breaking two or more resistance lines.
- Below expectations: 326K to 330K: A reading lower than forecast could send USD/CAD below one support level.
- Well below expectations: Below 326K: A sharp decline would signal weakness in the housing sector. In such an outcome, the pair could drop below two or more support levels.
For more on the loonie, see USD/CAD.