Forex Market: USD/CAD touches seven-week lows ahead of Fed minutes

The loonie, as the Canadian dollar is best known, advanced to the strongest level in seven weeks against its US counterpart, as market players awaited the release of the Federal Reserve minutes from its latest policy meeting later in the day to gauge the future direction of US monetary policy.

USD/CAD touched a session low at 1.0912 at 04:45 GMT, after which the pair consolidated at 1.0918, losing 0.05% for the day. Support was likely to be found at February 19th low, 1.0911, while resistance was to be met at April 8th high, 1.0978.

Greenbacks demand was pressured after Federal Reserve Chair Janet Yellen said last week 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”, because there was slack in labor markets. The stimulus program tends to weaken the US currency.

Investors attention turned to the release of the Federal Reserve minutes, as they offer detailed insights on FOMCs monetary policy stance. The Federal Open Market Committee (FOMC) is scheduled to release the minutes from its meeting on policy held on March 18th-19th at 18:00 GMT today..

At 19:30 GMT Fed President for Chicago Charles Evans is expected to make a statement. He was a FOMC voting member in September – December 2007, 2009 and 2011. Statements by FOMC members attract investors’ attention, as they may offer clues over the possible direction of monetary policy in the future. Evans’s remarks may indicate a positive or negative trend in a short term.

Meanwhile, data by Statistics Canada showed on Friday that 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.