Ralph Shell @ 1:55 PM, Tuesday August 10 2010
This morning the report on new Canadian housing starts did decline, as anticipated, with the annual rate of new home starts down to189,299 units in July 2010. Statistics Canada' New Housing Price Index rose 0.1% in June following an 9.3% price increase in May. Considering the vibrant Canadian housing market this modest change in housing prices can be fairly constructive compared to some of the decline in the US.
In an article in the Financial post this morning by Julie Fortier, the author paints a different picture of the Canadian housing market. She reports...."Canada led in the global housing recovery in the first quarter of 2010,
but moderating global growth, heightened financial market volatility and
sluggish job creation have led to a “dramatic” slowdown in Canada,
according to the Global Real Estate Trends report released Tuesday from
Scotia Economics."
Earlier in 2010 global real estate markets were firm as buyers were optimistic that expanding economic recovery would help prices. Adrienne Warren reports: senior economist at Scotia Economics said in the report. “Housing demand
and pricing improved in the first quarter of the year in the majority
of the advanced nations we track, benefiting from ultralow interest
rates, improved affordability, and in some cases, government purchase
incentives.”...she continues: “The recent slowdown has been most dramatic in Canada,” Warren noted.
“Average home prices in (the second quarter) were up just 6.8 per cent
year-over-year, compared with 16.6 per cent year-over-year in (the first
quarter). Sales, while still at a high level, have trended steadily
lower alongside reduced affordability and exhausted pent-up demand.”
Today the US Treasury auctioned $34B 3 year notes at the lowest level ever, with a bid to offer ratio at 3.31 to 1. Looks like there is no fear of inflation or any sovereign debt crises in the US.
With stocks weak and oil selling off a little it is no surprise to see the loonie weaken versus the USD. The specs have accumulated a good size long in the C$, and should the market get spooked, chasing out some of the newer longs, let's use this weakness to sell the USD versus the CAD if the pair sells off into the 1.07 level. Put your stop loss in the 1.08 area, and keep the top side of the trade open for right now.
Author: Ralph Shell - ForexRazor Analyst - Graduated from a small Ohio liberal arts college. Graduate studies in economics and history at Duke University. Ten years experience trading cash commodities in domestic and export markets. Former commodity analyst with Merrill Lynch in Chicago. Member of and floor trader at the Chicago Board of Trade for 18 years.