The USD hit session highs against the CAD on Wednesday after data showed that the U.S. economy contracted unexpectedly in the fourth quarter for the first time since the second quarter of 2009. USD/CAD hit 1.0042 during early U.S. trade, the session high; the pair subsequently consolidated at 1.0039, gaining 0.30%. The pair was likely to find support at 1.0006, the session low and resistance at 1.0099, the high of January 26 and a six-month high. The Commerce Department said the economy contracted by 0.1% in the fourth quarter, confounding expectations for growth of 1.1% and a sharp slowdown from growth of 3.1% in the preceding quarter. The unexpected contraction was attributed to a 6.6% decline in government spending and a significant drop in private inventories. However, the report said consumer spending rose by 2.2% and business investment was 8.8% higher. The data came after a report by payroll processor ADP showed that the U.S. private sector added 192,000 jobs in January, above expectations for an increase of 165,000. Market participants were looking ahead to the outcome of the Federal Reserve’s latest policy setting meeting later in the trading day. The U.S. central bank was expected to reaffirm its commitment to its easing program until the unemployment rate falls below 6.5%. The Canadian dollar remained under pressure after the Bank of Canada indicated last week that rate hikes were less imminent, citing a weaker economic outlook. The loonie, as the Canadian dollar is also known, fell to an almost 10-month low against the broadly stronger euro, with EUR/CAD advancing 0.74% to 1.3602. Sentiment on the single currency continued to be underpinned by indications that the worst of the crisis in the euro zone is over.
EasyForexNews Research Team