Forex Market: USD/CAD hovers near seven-week lows despite downbeat Canadian housing data

The loonie, as the Canadian dollar is best known, trimmed earlier gains, but hovered near the strongest level in seven weeks against its US counterpart, after data showed the number of housing starts in Canada declined to the weakest in more than four years and building permits fell last month.

USD/CAD hit a session low at 1.0917 at 11:25 GMT, after which the pair trimmed some of the previous gains to trade at 1.0938 by 13:11 GMT, losing 0.31% for the day. Support was likely to be received at February 19th low, 1.0911, while resistance was to be met at April 7th high, 1.1010.

The number of housing starts in Canada decreased to an annualized pace of 156 823 units in March from a revised 190 639 units in February, that was a smaller number than previously reported, data by the Canadian Mortgage and Housing Corporation showed today. Last months number of housing starts was the weakest since September 2009. The data raised concerns over the health of the nations housing sector.

In addition, the number of building permits in the country declined 11.6% in February compared to a month ago, data by Statistics Canada showed today. In January permits issued by the government were 8.1% more, after being revised down from a 8.5% previously reported gain.

On Friday, data by Statistics Canada showed the number of employed Canadians surged by 42 900 last month, the most since August, sharply exceeding analysts’ projections for a 22 500 gain. In February, the number of employed Canadians dropped by 7 000 from a month ago.

Also fanning positive sentiment, the rate of unemployment fell to 6.9% in March, the lowest in four months, while analysts’ expected the jobless rate will remain unchanged at February’s reading of 7.0%.

The Canadian GDP grew 0.5% to an annualized 1.61 trillion Canadian dollars (approximately $1.46 trillion) in January, offsetting a 0.5% drop in the previous month and beating analysts’ estimates for a 0.4% gain, a report by Statistics Canada showed on March 31st.

However, the BoC Governor Stephen Poloz commented on March 18th that first-quarter growth may be “softer” than the central bank forecast in January because of inclement weather and a rate cut cannot be ruled out, should the economy falter further. Central bank’s policy makers are set to reconvene on April 16th.

Meanwhile, investors’ attention was focused on the minutes from the March 18-19 Fed policy meeting, due to be released tomorrow. The Federal Open Market Committee, which cut monthly asset purchases by $10 billion at each of its past three meetings, is set to reconvene at the end of the month.

Federal Reserve Chair Janet Yellen said last week that the central bank needed to do more to fight against unemployment, because keeping interest rates near zero for more than five years and swelling its balance sheet with asset purchases seemed not to be enough. She also added that the US economy still needed monetary stimulus for “some time” and that most of the Fed officials shared the same opinion.