Forexpros – The U.S. dollar fell to a more than three-week low against its Canadian counterpart on Tuesday, as risk appetite improved at the start of the New Year while sharply higher oil prices also supported the Canadian dollar.
USD/CAD hit 1.0080 during early U.S. trade, the pair’s lowest since December 8; the pair subsequently consolidated at 1.0101, tumbling 0.85%.
The pair was likely to find support at 1.0051, the low of December 8 and resistance at 1.0196, the day’s high.
Market sentiment was bolstered by better-than-expected economic data out of the euro zone, after a report showed that the number of unemployed people in Germany fell more-than-expected in December, while the country’s jobless rate dropped to a record low.
The data came a day after a report indicating a slowdown in the rate of contraction in the manufacturing sector in the euro zone last month.
Risk appetite was also boosted after data on Sunday showed that Chinese manufacturing activity expanded in December after contracting the previous month.
But worries over sovereign debt issues in the euro zone lingered as investors looked ahead to bond auctions by Germany and France later in the week to gauge borrowing conditions in the region.
Also Tuesday, crude oil prices rallied with crude oil for delivery in February trading at USD102.20 a barrel on the New York Mercantile Exchange, jumping 2.48%.
Raw materials, including oil account for about half of Canada’s export revenue.
The Canadian dollar was slightly higher against the euro, with EUR/CAD dipping 0.07% to hit 1.3167.
Later in the day, the U.S. Institute of Supply Management was to publish a report on manufacturing activity, while the Federal Reserve was to publish the minutes of its December policy meeting.
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