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Canadian Dollar Directionless as Trade Deficit Widens

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Canadian Dollar Directionless as Trade Deficit Widens

The Canadian dollar fluctuated Thursday, as Canada’s trade position unexpectedly worsened in December.

Canada’s global trade deficit widened in December from $1.53 billion to $1.66 billion, the government’s statistics agency reported today. Merchandise imports increased 1.2 percent at the end of 2013, while exports rose 0.9 percent.

Meanwhile, Canada’s business climate improved considerably in January, easing concerns about the country’s economic outlook in 2014. The Richard Ivey School of Business’ gauge of business conditions rose from 46.3 to 56.8 last month, far exceeding forecasts. January’s PMI was also the highest in three months.

Meanwhile, jobless claims in the United States declined 20,000 to 331,000 in the week ending January 24. The positive reading builds anticipation for tomorrow’s official nonfarm payrolls report, which could show the US economy added 185,000 private jobs last month. A separate reading from the ADP Institute Wednesday showed the US economy added 175,000 payrolls in January, below forecasts.

At 18:45 GMT, the USDCAD pair was trading at 1.1059, a loss of 17 pips. The technical indicators show initial support is at 1.1015, followed by 1.0987 and 1.0960. On the upside, resistance is ascending at 1.1102, 1.1130 and 1.1158.

The USDCAD has lost around half a percent over the past five days. On Thursday the pair fluctuated between a high of 1.1120 and a low of 1.1052. A brighter business outlook in Canada has lowered concerns the central bank will cut interest rates this year. According to Scotiatbank, there is a 16 percent probability the Bank of Canada will cut interest rates over the next 12 months.

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