USD/CAD Relatively Unchanged As Canadian Officials Discuss New Housing Measures

USD/CAD is on track to close the day out with a doji print to snap a prior two-day rally that resulted in a gain of 1.32%. Ontario Premier Kathleen Wynne announced new measures to cool the housing market which are expected to pass through legislation, however, the comments did not have a significant impact on the exchange rate.

There are several measures that the Premier discussed today although it has been questioned how effective the government will be in slowing rapid house price inflation in the Toronto area.

A 15% tax on foreign property investors was one of the main measures after proving to be effective in Vancouver. The argument against the new tax carrying the same impact in the Toronto market is that there aren’t nearly as many foreign investors as compared to Vancouver.

After reports of rents doubling in some areas of Toronto, the government plans to introduce rent control. Up until now, rent increases for the current year were capped at 1.5% but only applied to properties that were occupied before 1991. Also a part of the “Ontario Fair Housing Plan” will be compensation for tenants if the landlord decides to evict for personal use which was a method sometimes used as a loophole to evict tenants.

There will also be taxes on property and land that is left vacant in hopes of balancing supply and demand.

Prime Minister Trudeau failed to comment whether the Toronto housing market is in a bubble in an interview with Bloomberg but stated that the government will be investing $11 billion into affordable homes for Canadians.

USD/CAD fell under pressure after testing the 1.3500 handle today but stabilized after a quick drop of about 40 points. The pair has traded in a range for most of the day, similar to the US dollar index (DXY).

DXY extended lower in early trading but found support at 99.43 which has held it higher on two attempts today. The level marks a spike low from December and had held the index higher at the end of January and early February.

WTI crude oil prices (USOIL) recovered earlier today after a sharp drop yesterday. A bottom was formed in late day trading on Wednesday and oil prices reached a high of $51.36 prior to falling under pressure once again in the North American session to give back earlier gains.

Out of the United States, the Philadelphia Fed manufacturing index fell short of expectations with a print of 22.0 in April versus the consensus of 25.6 and a prior reading of 32.8. Weekly unemployment claims rose to 244,000 from 234,000 claims in the prior reading, slightly missing the consensus for 241,000 claims.

A daily doji print in USD/CAD signals exhaustion after sharp gains following Thursday’s BoC testimony to the Senate committee. The pair is likely to remain rangebound, awaiting a catalyst, which is seen on the economic calendar for Friday.

Statistics Canada is scheduled to release consumer price index figures at 08:30 EST. CPI is expected to rise 0.4% in March after rising 0.2% in the prior month. The annual gain is expected at 1.8% from 2.0% in the prior reading.

Support in USD/CAD is found at 1.3437 which reflects the November monthly close. While above the level, the upside momentum seen this week suggests further gains towards the November high of 1.3588.

USD/CAD Daily Chart

USDCAD Daily April 20

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.