Forex Market: USD/CAD retreats from the strongest level since July 2009 following upbeat Canadian data

The loonie, as the Canadian dollar is best known, retreated from the weakest level in more than four years against its US counterpart, following the release of upbeat Canadian inflation and retail sales data.

USD/CAD hit a session low at 1.1174 at 12:30 GMT, after which the pair trimmed some losses to consolidate at 1.1205, losing 0.32% for the day. Support was likely to be found at March 19th low, 1.1122, while resistance was to be encountered at March 20th high, 1.1279, also the pairs strongest since July 2009.

Statistics Canada reported today that nations consumer price inflation advanced at the fastest pace in a year, rising 0.8% in February, exceeding analysts projections of a 0.6% increase and after consumer prices edged 0.3% higher in the previous month.

In addition, core consumer price inflation, which excludes the eight most volatile items, increased 0.7% last month, the most in a year, outstripping analysts expectations of a 0.5% gain and after a 0.2% advance in the preceding month.

A separate report revealed nations retail sales advanced at the fastest pace in eight months in January, mainly driven by more sales of automobiles and general merchandise goods.

Retail sales, which are one of the main sources of growth in the worlds 11th largest economy, were reported to have risen 1.3% to 40.7 billion Canadian dollars, following a revised 1.9% drop in December. Analysts had predicted that retail sales will gain 0.7% in January.

At the same time, core retail sales, which exclude automobile sales, rose by 1% in January, exceeding expectations of a 0.9% gain. Core retail sales were revised to a 1.5% drop from a previously reported 1.4% decline.

Meanwhile, greenback’s demand was supported after it became clear that manufacturing activity in the Philadelphia area rebounded in March after a drop in the previous month. The index, based on a survey among purchasing managers, revealed that companies reported increases in overall activity, new orders and shipments in March. The sub-indexes of future activity indicates that firms expected continued growth and employment over the next six months.

The corresponding Philadelphia Fed index, the broadest measure of manufacturing activity, rose from a reading of -6.3 in February to 9.0 in March.

However, purchases of existing homes declined last month to the weakest level since July 2012, a sign the industry may be loosing momentum, while initial jobless claims increased by 5 000 last week.

The number of closing contracts on previously owned homes, declined 0.4% to a 4.6 million annual rate, in line with analysts estimates and down from 4.62 million in the previous month, data by the National Association of Realtors (NAR) showed yesterday. At the same time, house prices have risen 9.1% from a year ago, NAR reported.

Elsewhere, EUR/GBP hit a session high at 0.8366 at 09:05 GMT, after which consolidation followed at 0.8357, adding 0.1% for the day. Support was likely to be received at March 20th low, 0.8329, while resistance was to be met at March 20th high, 0.8369. On March 18, the pair hit 0.8400, the strongest since December 18.