USD/CAD regains ground amid a slump in Canadian building permits

The loonie, as the Canadian dollar is best known, declined against its US counterpart, after a government report revealed the number of Canadian building permits sharply fell in December.

USD/CAD hit a one-week low at 1.1038 at 13:22 GMT, after which the pair erased earlier declines to trade at 1.1098 at 14:25 GMT, adding 0.15% for the day. Support was likely to be received at January 27th low, 1.1032, while resistance was to be encountered at February 4th high, 1.1123.

Statistics Canada reported that building permits declined 4.1% in December, defying analysts projections of a 1.5% increase. Novembers reading was upward revised to a 6.6% drop from earlier estimates of a 6.7% slump. Building permits are watched closely by market players, as they are a key component of overall demand in the housing market.

The Canadian dollar came under heavy selling pressure, following the release of the report.

The loonie retreated from 4-1/2-year lows against the US dollar on Monday, as data showed the nations Industrial Production Price Index (IPPI) increased by 0.7% in December, after a 0.1% advance in the previous month. December’s reading was the strongest since March, when the index rose by 1.4%.

In addition, a separate report showed the nations Raw Materials Price Index (RMPI) surged by 1.9% in December, capping the highest increase since August. In November the index declined 4.1%. The RMPI is regarded as a leading indicator of consumer inflation, which is a major part of the overall inflation.

Meanwhile, Automatic Data Processing Inc. (ADP) reported today that the US private sector added 175 000 new jobs in January, trailing analysts expectations of an increase to 185 000. At the same time, new jobs added in December were downward revised to 227 000 from earlier estimates of 238 000. The ADP index is released two days before the release of the official data by the US Department of Labor. The report, due to be published on Friday, may show non-farm payrolls increased by 180 000 in January, after they rose by 74 000 in December, the weakest level since June 2012.

Activity in the services sector in the United States probably increased in January, with the corresponding PMI climbing to a reading of 53.7, after a month ago the index came in at a value of 53.0. The Institute for Supply Management (ISM) will announce the official reading at 15:00 GMT today. Better than expected figures will certainly provide support to greenback’s demand.

Elsewhere, EUR/USD hit a session high at 1.3529 at 09:40 GMT, after which the pair consolidated at 1.3522 to trade little changed. Support was likely to be received at February 4th low, 1.3494, while resistance was to be encountered at February 4th high, 1.3539.