By Ketki Saxena
Investing.com -- The Canadian dollar weakened against its US counterpart today as China worries spurred a tumble in crude prices, and flight to the safe haven greenback.
The commodity linked, risk sensitive Canadian dollar was pressured by a double whammy from China - news that Chinese new bank loans tumbled despite a cut in interest rates. Meanwhile, Country Garden, a top private real estate developer in the country sought an unprecedented delay in payment for a private domestic bond following trading suspension in eleven such bonds.
Meanwhile, China worries supported the greenback, helping the dollar index closing at its highest level in over a month - but below intraday highs, suggesting that a consolidation might be on the charts.
On a fundamental level for the pair, analysts at Scotiabank (TSX:BNS) note that "The CAD looks cheap and should be trading somewhat higher than it is. Very stretched valuation suggests near-term scope for the USD to extend should be limited, all else equal."
On a technical level, Scotiabank analysts note that "Intraday trading patterns reinforce the picture of firm resistance in the mid-1.34 zone but, taking a step back, the underlying bull trend in the USD has developed solidly on the short-term studies which suggest spot will remain well supported for now and tilts risks towards additional gains – eventually. Support is 1.3375, with some relief for the CAD likely to develop below here."
Up next for the pair, all eyes will be on Canada's CPI data, due tomorrow.
Consumer prices in July are expected to have accelerated again, driven by a surge in energy prices. However, despite the expected rise in inflation, economists are expecting the Bank of Canada to remain on the sidelines for now as core measures are expected to continue to slow.
South of the border, traders will be watching for US retail sales data, expected to provide further insight on future monetary policy guidance for the US Federal Reserve.