USD/CAD trades close to two-month highs after US, Canadian data points

US dollar traded in proximity to highs unseen in two months against its Canadian counterpart on Thursday, as US trade balance deficit widened in September, jobless claims fell less than projected, while Septembers trade deficit in Canada contracted considerably.

USD/CAD reached a session high at 1.0508 at 11:40 GMT, also the pairs highest point since September 5th, after which consolidation followed at 1.0501, gaining 0.43% for the day. Support was likely to be received at current session low, 1.0439, while resistance was to be seen at September 5th high, 1.0516.

Earlier on Thursday it became clear, that the deficit on US trade balance widened for a third month in a row in September, reaching 41.778 billion USD, as in August the deficit figure has been revised up to 38.701 billion USD from 38.803 billion USD previously. Export of goods and services dropped at a moderate pace, while import of oil and cell phones increased. Experts had expected a deficit at the amount of 38.700 billion USD in September. Imports rose 1.2% to reach 230.7 billion USD, while exports fell 0.2% to 188.9 billion USD in September. Trade with China produced a new record deficit, amounting to 30.5 billion USD. On the other hand, trade with Euro zone countries registered a lesser deficit of 8 billion USD in September, while a month ago the deficit figure pointed 9.8 billion USD.

Additionally, the Department of Labor said that the number of people who filed for unemployment assistance in the United States decreased for a fourth consecutive week, which came as another evidence that the labor market is in a process of improvement. The number of initial jobless claims, an indicator for lay-offs in the country, dropped by 2 000 to reach 339 000 during the week ending on November 9th 2013. Results, reported in the preceding week, have been revised up to 341 000, while preliminary estimates pointed that claims will drop more, to 330 000. The average number of claims during the past four weeks, an indicator considered as lacking seasonal effects, decreased to 344 000.

Market players now focused on the upcoming Senate hearing, which will confirm Janet Yellen as the first chairwoman of the Federal Reserve Bank, after she made dovish remarks on Wednesday, saying that US labor market and economy as a whole were “performing far short of their potential” and there was “more work to do” on economic recovery.

“When the Yellen speech was released, everyone was looking for a dovish approach, and that’s what came out in the end, and it was a kind of buy-the-rumor, sell-the-fact reaction,” said Darcy Browne, managing director of currencies at Canadian Imperial Bank of Commerce, by phone from Toronto, cited by Bloomberg News. “The market’s mind is that they want a stronger dollar, and they want to achieve it.”

Also, Federal Reserve Bank President for Philadelphia, Charles Plosser, said today that the present monetary policy course of the central bank could boost financial instability in the country and this could result in imposing new restraints for the bank. According to Plosser, the Congress should limit Feds authority, so that the bank oversees price stability only.

Meanwhile, in Canada, a report showed that nations trade deficit shrank significantly more than projected in the month of September, as the record export of crude oil led to an overall increase in export of energy products. The deficit amounted to 0.435 billion CAD in September from a revised up figure of 1.086 billion CAD in August. Nations exports rose 1.8% to reach 40.65 billion CAD in September, or the highest level since December 2011. Imports climbed 0.2% to the record 41.08 billion CAD. Analysts at Royal Bank of Canada had expected a deficit at the amount of 1.000 billion CAD in September.

The loonie, as Canadian dollar is also known, retreated to two-month lows against the US dollar also because of bets that currencies of commodity-exporting countries advanced too much and too fast on Wednesday, after Federal Reserve governor-nominee Janet Yellen stressed on the need of further US economic strength, so that the Federal Reserve could reduce its monetary stimulus.

Elsewhere, the Canadian currency was lower against the euro, with EUR/CAD cross advancing 0.33% on a daily basis to trade at 1.4153. GBP/CAD pair was up 0.70% to trade at 1.6912.