The Canadian dollar has reversed directions on Tuesday and posted slight losses. Currently, USD/CAD is trading at 1.2549, up 0.25% on the day.
Canada Ivey PMI expected to climb
The Ivey PMI rebounded in impressive form in February, rising to 60.0, well into expansionary territory. This followed two straight readings below the 50-level, which indicated contraction. The street consensus stands at 62.0 for March, and a read within expectations could boost the Canadian dollar.
A booming house market in Canada and elsewhere has raised fears of a housing bubble. Soaring house prices are nothing new in major urban centers such as Toronto and Vancouver, but this red-hot market has spread across the country.
However, the Bank of Canada will be unwilling to make any moves such as raising interest rates, given the fragility of the Canadian economy. The recovery could be a long one, as Canada’s vaccine rollout has been unimpressive, and Covid continues to weigh on the economy. BoC Governor Tiff Macklem has called the price increases in housing “unsustainable”, but with mortgage rates at an ultra-low 1.5%, demand will likely remain strong, keeping house prices at very high levels in the near future. If mortgage rates suddenly rise, it could trigger a significant drop in house prices and drag the Canadian dollar down as well
The US dollar has lost some of its lustre, as US Treasury yields have retreated. The greenback failed to take advantage of a stellar Nonfarm Payrolls report on Friday, which rose to 916 thousand, up from 379 thousand. With the Biden administration working on a massive infrastructure package, there are expectations that upcoming NFP prints will exceed the 1-million mark, as the US economy continues to gather steam.
- There is resistance at 1.2640. This is followed by resistance at 1.2703
- On the downside, there is pressure on support at 1.2521. Below, there is a support level is at 1.2465
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