The US dollar weakened against the loonie yesterday following the release of lower-than-expected factory orders data for April. Notably, Canada’s building permit data for April also missed estimates. However, worries about recession and Fed rate hikes encouraged traders to sell the US dollar. Overall, the USD/CAD pair declined from a high of 1.2732 to a low of 1.2557 in the last 24 hours.
According to the data published by Automatic Data Processing, Inc., the non-farm payrolls increased by 128,000 jobs in May, following an addition of 202,000 jobs in the prior month, but disappointed analysts who were anticipating an addition of 295,000 jobs.
While small businesses lost 91,000 jobs, medium businesses added 97,000 jobs. Large businesses added 122,000 jobs.
Sector-wise, goods-producing industries added 24,000 jobs. In particular, manufacturing industries added 22,000 jobs.
Service-providing firms added 104,000 jobs. Specifically, education/health-related firms, and leisure/hospitality entities added 46,000 and 17,000 jobs, respectively.
According to the US Department of Labor, the first-time unemployment claims declined to 200,000 in the week ended May 28, from 211,000 in the previous week (upwardly revised from 210,000). The four-week moving average was 206,500, a decline from 207,000 (upwardly revised from 206,750) in the earlier week.
The US Census Bureau stated that the country’s factory orders improved 0.30% m-o-m in April, following a rise of 1.80% in the previous month, but missed the 0.60% growth expected by economists.
In value terms, factory orders were $533.20 billion in April. Durable goods orders increased 0.50% in April, following a 0.70% rise in March. Non-durable goods orders grew by 0.20% in April, following a 2.90% increase in the prior month. Primary metals posted an increase of 0.80% in April, following a 3.30% growth in March.
Computers & electronic goods recorded an increase of 0.10%, compared with a 1.80% surge in the prior month. Fabricated metal posted a decline of 0.20%. Likewise, electrical equipment, appliances, and components posted a drop of 0.20%. On the contrary, machinery orders increased 1%, while transport equipment orders grew by 0.70%.
As per Statistics Canada, building permits fell by 0.60% m-o-m in April, following a contraction of 6.30% in the prior month, and disappointed economists who were anticipating a 0.50% rise in the building permits in the reported month.
In value terms, building permits were C$11.70 billion in April. Residential permits fell by 3.30% to C$7.70 billion in April, primarily negated by 5% gains in the non-residential sector.
Construction intentions in the single-family home component decreased 2%. The value of multi-family building permits retracted 4.40%.
The cumulative value of permits in the non-residential sector grew by 5% to C$3.90 billion in April. Also, construction intentions in the institutional sector increased 7.20%.
The weak economic data from both the US and Canada is expected to keep the USD/CAD pair range-bound in the near future.
The historical price chart reveals that the USD/CAD currency pair is deteriorating after facing resistance at 1.2880. The next support is expected near 1.2465. The USD/CAD pair is trading below its 50-day moving average, while the stochastics indicator is in the bearish zone. We are expecting the pair to stay in a downtrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
