Forex Market: USD/CAD preserves daily losses despite better-than-expected US data

The loonie, as the Canadian dollar is best known, preserved daily gains against its US counterpart, despite retail sales in the US rose in February for the first time in three months, while initial jobless claims unexpectedly declined last week. However, loonies demand was supported after Statistics Canada reported today that prices of new houses increased in January by the most since May 2012.

USD/CAD touched a session low at 1.1055 at 09:25 GMT, after which the pair preserved daily losses to trade at 1.1059 at 14:10 GMT, losing 0.55% on a daily basis. Support was likely to be found at March 7th low, 1.0981, while resistance was to be encountered at March 12th high, 1.1154.

The US Census Bureau reported today that retail sales in the US increased 0.3% in February, exceeding analysts expectations of a 0.2% gain and after a 0.6% drop in January that was larger than the 0.4% decline reported earlier. Core retail sales, which exclude the volatile automobile sales, rose 0.3% in February, above analysts projections for a 0.1% gain and after a 0.3% drop in the previous month, that was larger than initially reported. Retail spending is regarded as a key economic indicator as it accounts for almost 70% of the US economy.

“Consumer confidence has been pretty resilient throughout this entire period,” Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut, said before the report, cited by Bloomberg. “Equities have been up a little bit for the year, so the wealth effects are still relatively favorable.”

A separate report today showed the number of people filing for unemployment benefits unexpectedly declined last week, reaching the weakest level since late November. Initial jobless claims dropped to 315 000 from 324 000 a week ago, compared to analysts projections of an increase to 330 000.

Meanwhile, loonies demand was supported after Statistics Canada reported today that prices of new houses increased in January by the most since May 2012. The corresponding New Housing Price Index (NHPI) rose 0.3% in January, after a 0.1% gain in December, mainly driven by strong increase in the Prairie region. Data also showed that the metropolitan region of Calgary was the top contributor to the January increase, with prices surging 1.3% compared to December. Builders reported that increased labor and material costs were the main reasons for the gain, the largest in the region since April 2007.

On annual basis, the NHPI rose 1.5% in January, following a 1.3% increase in the preceding month, marking the first gain as the pace of annual growth had been slowing since August. According to Statistics Canada, the two main contributors to the annual advance were again Calgary and also the combined metropolitan area of Toronto and Oshawa. Housing prices in Calgary increased by 7%, capping the highest annual advance since July 2007. In addition, the combined area of Toronto and Oshawa reported a 1.4% annualized increase in contractors selling prices for a third straight month.

Earlier in March, Bank of Canada kept its main interest rate unchanged at 1%, where it has remained since September 2010, citing weak exports and investment. The central bank also said the economy may slow its pace in the first quarter.

The loonie weakened to more than four-year low of 1.1224 against the US dollar on January 31st, after the central bank said earlier in January the Canadian currency was still too strong and was hurting exporters. This came after December’s statement, which warned inflation rate may stay below Bank of Canada’s 2% target for a prolonged period of time, fueling speculation the central bank may cut interest rates.

Elsewhere, USD/JPY hit a session low at 102:42 at 08:29 GMT, after which the pair consolidated at 102.51, losing 0.25% for the day. Support was likely to be received at March 6th low, 102.33, while resistance was to be met at March 12th high, 103.10.