By Ketki Saxena
Investing.com -- The Canadian dollar experienced a decline against the U.S. dollar on Tuesday, as risk sentiment remained dominant, driven by investors' concerns about a potential slowdown in China's economy negatively affecting global markets and reducing commodity demand.
The loonie was further weighed down by predictions of reduced oil demand growth in China and dissatisfaction with investors disappointed with the size of cuts to China's primary lending rates.
The U.S. dollar meanwhile saw an upswing following better-than-expected May Housing Starts data released by the US Census Bureau. Furthermore, Building Permits for that same month outperformed consensus estimates, fueling speculation regarding additional rate hikes from the Federal Reserve.
On a technical level for the pair, analysts at FX street note "While buyers have shown some strength, they have yet to overcome the negative territory. The Relative Strength Index (RSI) currently sits below its midpoint, but shows a positive slope while the Moving Average Convergence Divergence (MACD) depicts decreasing red bars, suggesting a waning selling momentum."
"Upcoming resistance for USD/CAD is seen at the 1.3270 zone, followed by the psychological mark at 1.3300 and the 1.3350 area. On the other hand, on the downside, the next support levels to watch are the 1.3200 level, followed by the cycle low at 1.3180 and the 1.3150 area."
Looking ahead for the pair, analysts at Scotiabank (TSX:BNS) note, "Price may be carving out a small bear wedge or flag pattern amid a sustained and deeply entrenched USD bear trend on the charts... Softer trading for the USD remains the more likely direction for this market in the coming days."
Up next for the pair, all eyes will be on US Federal Reserve Chairman Jerome Powell's upcoming statements before U.S. Congress scheduled for Wednesday and Thursday this week.
Investors will also be eyeing minutes from the Bank of Canada’s policy decision two weeks prior are set to be published on Wednesday.