USD/CAD on six-week highs

US dollar soared against its Canadian peer on Thursday, reaching its highest point in six weeks, following the weaker-than-projected Canadian retail sales and the minutes of Federal Reserve Banks meeting in July.

USD/CAD reached a session high at 1.0515 at 13:20 GMT, also the pairs highest point since July 10th, after which consolidation followed at 1.0514, up by 0.42% for the day. Support was likely to be received at current session low, 1.0469, while resistance was to be encountered at July 9th high, 1.0573.

The greenback received support after the minutes of Fed’s most recent meeting showed that policymakers were “broadly comfortable” with Chairman Ben Bernanke’s time frame to begin asset purchase tapering this year, if the economy improves, with a few officials saying a reduction might be necessary soon. “Almost all committee members agreed that a change in the purchase program was not yet appropriate,” and a few stated that “it might soon be time to slow somewhat the pace of purchases as outlined in that plan,” according to the minutes of the Federal Open Market Committee’s July 30-31st meeting released yesterday. Recent economic data out of the United States was described as “mixed” in the minutes, so it is understandable that tapering the easing program may be delayed, if economic development still showed weak results.

However, earlier today it became clear that the number of people, who filed for unemployment assistance in the United States increased during last week and remained in proximity to the five-year low, which suggested that US labor market was rather improving than declining. The Department of Labor reported that initial jobless claims rose by 13 000 to 336 000 during the week ending on August 17th 2013, as experts had anticipated a lesser increase in the number of claims, to 330 000. Result during the preceding week was revised up by 3 000 to reach 323 000 claims, which marks the lowest level in five years. The average number of claims during the past four weeks, which is considered as lacking seasonal effects, decreased by 2 250 to 330 500, which was the lowest level since November 2007. As a whole, the labor market in the states demonstrated a steady improvement in performance so far during the year, as it was supported by rising consumer expenditures and recovery in the sector of construction.

Additionally, another report showed that the advance value of the US manufacturing PMI improved to 53.9 in August, reaching a five-month high, from a value of 53.7 in July. Preliminary estimates pointed that the indicator will increase to 54.0. This advance value of the index reflects about 85% of the answers by the surveyed companies and it witnesses a moderate pace of expansion in manufacturing activity. Values above the key level of 50.0 are a signal for good performance.

Meanwhile, in Canada, retail sales registered a larger than expected drop in June, as the flood of Southern Alberta made consumers reduce their purchases of food, alcohol and clothing. Statistics Canada said that retail sales decreased by 0.6% to 40.07 billion CAD in June compared to May, marking their first significant monthly drop in six months. Experts had expected a 0.4% decrease in sales. Retail sales, excluding automobile sales, dropped by 0.8% to 30.56 billion CAD in June on a monthly basis, as expectations pointed that sales will remain flat. Upon the release of this data the loonie, as Canadian dollar is also known, extended its losses against the greenback.

Elsewhere, the Canadian currency retreated to a 22-month low against the euro, as EUR/CAD cross advanced 0.29% to 1.4025.