USD/CAD distanced from session lows following mixed Canadian data

US dollar regained ground against its Canadian peer on Tuesday, following the release of mixed economic data out of Canada, showing nations trade deficit unexpectedly widened and the number of housing starts increased.

Having fallen to a session low at 1.0306 at 12:15 GMT, USD/CAD regained positions to trade at 1.0329 at 13:31 GMT, gaining 0.14% for the day. Support was likely to be received at October 7th low, 1.0290, while resistance was to be met at October 2nd high, 1.0355.

Earlier on trading Tuesday a report showed that Canadian trade balance deficit unexpectedly widened in the month of August, as import rose at the fastest pace during the past nine months, reaching a record level and surpassing export. The deficit figure reached 1.306 billion CAD in August, following the revised deficit of 1.190 billion CAD in July from a deficit of 0.931 billion CAD previously. Experts had anticipated a lesser deficit at the amount of 0.700 billion CAD in August. Export rose 1.8% to reach 39.77 billion CAD in August, as a month ago it fell 1.7%. At the same time, import increased 2.1% to 41.08 billion CAD during the same month, marking its highest level since November 2012. The main support behind this result came from the increased import of automobiles, aircraft and energy products.

Separately, the number of housing starts in Canada increased to the annual 193 637 units in September, or 5.3% more in comparison with August. According to data by the Canada Mortgage and Housing Corporation (CMHC), Septembers result exceeded expectations of 185 000 new building sites. Housing starts in Canadian cities rose 4.3% in September, supported by sites in British Colombia and Quebec. However, in Ontario the number of housing starts decreased.

Meanwhile, US Senate Democrats are planning to conduct a test vote before the end of this week on a measure that would grant President Barack Obama authority to increase the 16.7 trillion USD debt ceiling, probably for one year, unless two-thirds of both chambers of Congress disapprove. This was seen as a temporary solution to the US budget deadlock.

On the other hand, International Monetary Fund Chief Economist Olivier Blanchard said on Tuesday that if failure to raise the US debt limit appeared to be prolonged, this would “almost certainly derail the recovery”. He also warned this could lead to a slow down in the pace of US deficit reduction program.

No data regarding the trade balance out of the United States was released today.

Elsewhere, the loonie, as the Canadian dollar is also known, was lower against the euro, with EUR/CAD cross gaining 0.16% for the day to trade at 1.4032 at 14:09 GMT. GBP/CAD pair was also on positive territory, up by 0.26% to trade at 1.6646 at 14:12 GMT.