The US dollar pulled back from 4-month highs against its Canadian counterpart, after BoC released the results from its business outlook survey, which showed some positive signs for the Canadian economic outlook.
Following the release, USD/CAD hit a session low at 1.0861 at 15:40 GMT, losing 0.28% on a daily basis. Support was likely to be received at January 10th low, 1.0838, while resistance was to be met January 10th high, 1.0945, also the pairs strongest since October 2009.
The loonie was supported following the release of Bank of Canadas Business Outlook Survey, which showed some positive signs for the economic outlook, mainly for exports and investment. Businesses were hopeful to see improvement in sales activity over the next 12 months, amid strengthening US economic outlook, which is Canadas biggest trading partner.
The Canadian dollar declined sharply on Friday, after Statistics Canada reported the number of employed people declined by 45 900 in December, the most since November 2011, after an increase of 21 600 in November. Analysts had expected that the Canadian employers will hire 14 100 workers in December.
According to the report, the reduction in the number of employed people was mainly due to the enormous decline of full-time workers, whose number decreased by 60 000 in the last month, while part-time workers increased by 14 200.
Adding to bearish sentiment, Canadian unemployment rate also increased to 7.2% in December from 6.9% in the preceding month. Analysts had expected the unemployment to remain unchanged at 6.9%.
The downbeat data increased bets Bank of Canada should stick to low interest rates for a prolonged period of time.
Meanwhile, the greenback continued to be pressured after worse-than-expected employment data eased concerns the Federal Reserve might reduce further its monthly bond purchases at FOMC’s upcoming meeting. The Fed monetary stimulus program tends to devalue the US dollar.
The Department of Labor reported on Friday that US employers added 74 000 jobs in December, the least since January 2011, sharply underperforming expectations for a moderate retreat in job creation to 196 000 payrolls. November’s reading received an upward revision to 241 000 from initially estimated at 203 000.
On the other hand, the rate of unemployment in the country dropped significantly, reaching 6.7% in December from 7.0% in the preceding month, marking the lowest rate since October 2008. However, this came as a result of a larger percentage of US citizens leaving nation’s work force. Preliminary estimates pointed that US unemployment rate will remain unchanged in December.
Fed decided on December 18th to cut its monthly bond purchases by $10 billion to $75 billion, this month, citing improvements in the labor market. Fed Chairman Ben Bernanke said, regarding this decision, that Fed will probably continue to do a measured reduction in the pace of purchases at each meeting. According to a Bloomberg News survey of economists conducted on December 19, policy makers will cut Fed’s stimulus in $10 billion increments over the next seven committee meetings.
Investors awaited the release of a report on the US Federal Budget Balance for December, which may reveal a surplus of $44.3 billion, following the deficit of $135.23 billion in the preceding month. Atlanta Fed President Dennis Lockhart is also expected to speak later today.
Elsewhere, having touched a session low at 1.3638 at 13:30 GMT, EUR/USD traded at 1.3647 at 15:29 GMT, losing 0.17% for the day. Support was likely to be received at January 10th low, 1.3574, while resistance was to be encountered at January 2nd high, 1.3775.
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