US dollar continued trading on lower levels against its Canadian counterpart on Tuesday, although a report showed an unexpectedly strong contraction in Canadian housing starts, but chilled out concerns over situation with Syria and upbeat string of Chinese data boosted appetite for riskier assets.
USD/CAD fell to a session low at 1.0330 at 11:50 GMT, the lowest point since August 19th, after which consolidation followed at 1.0355, still losing 0.17% for the day. Support was expected at August 19th low, 1.0300, while resistance was to be encountered at current session high, 1.0381.
Market sentiment and investors’ risk appetite were boosted after today it became clear that Chinese industrial production rose by 10.4% in August on annual basis, outstripping preliminary estimates of a 9.9% increase and after the indicator improved by 9.7% in July. In addition, Chinese retail sales climbed 13.4% in August annually, after the 13.2% advance during the preceding month. Experts had anticipated that sales will show a 13.2% increase. These data points suggested that the second largest economy worldwide was recovering from the slow down, experienced earlier.
In addition, sentiment was strengthened after Syrian Foreign Minister agreed to Russia’s proposal his country to submit all of its chemical weapons under international control, as this could avert a possible military strike by the United States. As a result of the increased risk appetite, Canadian dollar registered gains against the majority of its 16 most-traded peers earlier on trading Tuesday and rose for a third session in a row against the US dollar.
In Canada, a report showed that housing starts decreased by 6.6% to annual 180 291 units in August, which was below projections of 190 000 units. The number of housing starts during the preceding month was revised up to 193 021 units from 192 853 units previously. The tendency regarding this indicator, however, continued to be relatively stable for the sixth consecutive month. Single-family house construction dropped by 0.9% to 58 398 sites in the month of August, while multi-family house construction decreased by 8.4% to 104 704 sites during the same month.
“It’s a perfect storm for Canadian dollar strength,” John Curran, a senior vice president at CanadianForex Ltd., an online foreign exchange dealer, said by phone from Toronto, cited by Bloomberg. “The main thing is the hangover from data on Friday and Monday, and the possibility of a Russian-backed solution for Syria has further strengthened the Canadian dollar.”
Meanwhile, the loonie, as Canadian dollar is also known, was steady against the euro, with EUR/CAD cross ticking up 0.03% on a daily basis to trade at 1.3754 at 14:08 GMT. GBP/CAD pair was gaining 0.04% to trade at 1.6295 at 14:10 GMT.
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