Will loonie maintain its latest gains?

USDCAD, H1

USDCAD dipped briefly following the in-line Canada manufacturing shipments outcome. The pairing bottomed at 1.2849 from opening highs of 1.2870, however it dipped further down on US Industrial data and Capacity, breaking below the immediate support level at 1.2800, which is also the 38.2% Fibonacci retracement level set since April 7. A closing below this level today, will open the way to the 50% Fibonacci level at 1.2760. However, this scenario does not seem possible today, since USD remains on bid, mainly affected by US treasury yields, Yields held below highs as blue chip stocks limp slightly lower after the open .

Therefore, it  is likely to see today, a reversal back above support level at 1.2800 and a return back at the 1.2850 level. An hourly closing above 38.2% should confirm the retest of  1.2850.

Canada manufacturing shipment values grew 1.4% in March after a revised 2.7% gain in February (was +1.9%). The increase in March matched expectations (we saw +1.5%). Sales improved in 13 of 21 industries during March. Firmer sales at primary metal (4.2%) aerospace products and parts (10.6%), fabricated metal (4.6%) and other transportations equipment industries (37.4%) drove the increase in total shipment values. Total sales volumes were up 0.6% in March. This is an encouraging report, suggestive of further growth in the economy during March after the rebound in February from the temporary factor induced contraction in January GDP.

In US, the housing starts report was weaker than expected with April declines for starts and permits. Today’s report included revisions going back to January 2012, which raised starts in Q4 and Q1, lowered permits in Q1 to narrow the gap to starts, but raised them throughout 2017. Starts under construction were unchanged while completions rose 2.8%. We saw a Q4 hurricane-boost for starts, permits, and completions with no “give back” in Q1, and we expect to see some pull-back in Q2. Starts and permits have posted gains of 169% and 164% respectively from 2009 bottoms of 478k and 513k. We expect GDP growth of 3.6% in Q2 after a 2.3% increase in Q1, with growth in “real” residential construction of 2% in Q2 and 4% in Q3. Meanwhile, The 0.7% U.S. April industrial production beat estimates to leave the first new peak since November of 2014, though it followed big downward revisions in manufacturing that left a weaker than expected report. The April rise reflected gains of 0.5% for manufacturing that tracked strong April goods-sector jobs data and strength in the producer sentiment and factory reports.

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