Canadian dollar holds slightly above Friday's low, despite weak data on greenback correction

The Canadian dollar has held above Friday's close despite a worse-than-expected housing starts data on Monday even as the market awaited the more important January employment data scheduled for later in the week.

USD/CAD slipped to 1.2571 from the previous close of 1.2628 in the run up to Monday's data, but inched back to 1.2601 after it was released. At Friday's close, the loonie was at its weakest in about a month, as the big positive surprise in the US jobs market pushed the greenback broadly higher.

Housing starts in Canada recorded 156,300 in February, from 187,000 a year earlier, and compared to the market expectations of 179,000, data showed on 9 March.

Technically, the pair is moving sideways with the bias slightly more skewed to the downside. If the 1.2650 resistance is broken, the pair would retest the 30 January multi-year high of 1.2800.

On the other hand, if it manages to break below 1.2400, USD/CAD would soon hit a two-month low near 1.2000 and the immediate support would be 1.1950.

For the loonie to rebound strongly, the jobs data on Friday should surprise on the higher side but the forecast is for a weakening jobs market.

Canadian employers may have shed 5000 jobs in February after adding 35,400 to the payroll at the start of the year, as per the market consensus. The unemployment rate may have risen to 6.7% from 6.6%, analysts predict.

The big data is scheduled for Friday and until then, the Canadian dollar is likely to track the general dollar move.

But with a light data calendar for the week, events like speeches by some Fed officials can be crucial as last week's jobs data surprise may prompt them to comment on the likelihood of the US hiking rates earlier than expected. The US weekly jobless numbers will also be key.

The February producer price index and the March Reuters/Michigan consumer confidence index are other two US numbers that could impact markets this week. Both will be released on Friday.

The USD index jumped 1.35% on Friday to a new 11-year high of 97.65 and then extended the gains to 97.78 on Monday. So far in March, the index has risen 2.5%, adding to the 20% rally since July through February.

US non-farm employers added 295,000 jobs in February as per data from the Department of Labour, up from 239,000 in January and compared to market expectations of 240,000.