By Ketki Saxena
Investing.com -- The Canadian dollar weakened to a three-week low against its U.S. counterpart on Tuesday, pressured by cooling domestic manufacturing data, indicating weakness in the Canadian economy, and lower crude prices on profit-taking after July's rally.
While S&P Global (NYSE:SPGI)'s measure of Canadian manufacturing activity rose marginally from 48.8 to 49.6 from in June, a reading below 50 indicates a contraction. Canadian manufacturing has now contracted for a third consecutive month.
The Canadian dollar was also pressured by crude prices, as investors indulged in profit taking ahead of Friday's OPEC+ meeting.
Meanwhile, the US Dollar gained across the board despite mixed economic data, with JOLTS Job Openings coming in below expectations, but relatively robust U.S. manufacturing and construction helped provide support for the greenback.
Adam Button, chief currency analyst at ForexLive notes today's economic data shows that "We are starting to see cracks in the Canadian economy but not in the U.S."
As a result, "The (U.S.) dollar is reasserting itself as the champion of the currency market and the Canadian dollar is just caught in that wave".
On a fundamental level for the pair, analysts at HSBC note however that, "The CAD looks cheap, relative to recent moves in oil prices and risk appetite. Relative rates may be less relevant, although the case for further Bank of Canada (BoC) tightening remains robust."
"As with other central banks, the outcome will be data-dependent and so the July employment report (4 August), July inflation data (15 August), and June retail sales (23 August) will be key market pinch points."
Looking ahead for the pair, HSBC analysts are looking "for USD/CAD to move lower in the coming weeks and break through support at 1.31."
On a technical level for the pair, analysts at Scotiabank (TSX:BNS) note, "A clear move through the mid-1.32s raises the risk of a push on to a 1.33 handle but that may be the most we can expect at the moment."
"The charts still reflect strong resistance overhead at 1.3350/60."
"Support is 1.3210. "