USD/CAD touches one-week highs on better-than-expected US durable goods orders data

The loonie, as the Canadian dollar is best known, snapped two days of advances against its US counterpart, following a report that revealed durable goods orders in the US declined less than forecast last month, an evidence US manufacturing was starting to recover after the recent severe winter conditions.

USD/CAD touched a session high at 1.1149 at 14:53 GMT, after which consolidation followed at 1.1142, adding 0.08% for the day. Support was likely to be received at February 26th low, 1.1073, while resistance was to be encountered at February 21st high, 1.1196.

The US Commerce department reported today that durable goods orders, fell by 1% in January, after a revised 5.3% drop in the previous month that was larger than initially estimated. Analysts had expected that bookings for durable goods or those meant to last at least three years will decline by 1.7%.

Orders for durable goods, excluding volatile transportation items, rose by 1.1% in January, confounding experts forecasts for a 0.3% drop. Core durable goods orders were revised to a 1.9% decline from a previously estimated 1.6% drop.

However, durable goods orders, excluding defense, decreased by 1.8% in January, after a 3.7% slump in the previous year. Analysts had predicted a smaller decline of 1.2%.

In addition, initial jobless claims rose by 14 000 to 348 000 in the week ended February 22, exceeding analysts projections of 335 000 and up from 334 000 a week ago, data by the US Labor Department showed. The higher-than-expected number of Americans that filed for jobless benefits last week, fueled concerns that the labor market recovers unevenly.

Market players keenly anticipated Federal Reserve Chair Janet Yellen to testify in front of the Senate Banking Committee later today, after the testimony was postponed on February 13th due to a snow storm. Yellen said earlier in February that US economy has gained enough strength in order to withstand reduction of monetary stimulus, while a considerable change in outlook would urge the central bank to further slow its tapering.

Meanwhile, the loonie received support, after a report by Statistics Canada revealed the nations current account deficit widened to 16 billion Canadian dollars in the final three months of 2013, defying analysts expectations for a larger decline to 17 billion Canadian dollars. However, the deficit was higher, compared to the third quarter when it stood at 14.8 billion Canadian dollars.

The eastern parts of Canada were hit by a severe ice storm in December, which caused power outages and left thousands of homes in Ontario, Quebec and the Atlantic provinces without electricity.

According to Bank of Montreal chief economist Doug Porter, cited by Bloomberg, the Canadian gross domestic product probably shrank in December because of the storm.

The Canadian economy is struggling to recover from an almost two-year slowdown and the latest reported data did show that the economy grew at an annualized 2.7% pace in the third quarter. However, economists surveyed by Bloomberg News predicted that growth slowed to 2.5% in the fourth quarter, ahead of Statistics Canada quarterly GDP report, scheduled to be released tomorrow.

Elsewhere, USD/JPY hit a session low at 101.73 at 10:50 GMT, after which consolidation followed at 101.78, losing 0.58% for the day. Support was likely to be received at February 17th low, 101.39, while resistance was too be encountered at February 26th high, 102.61.