By Ketki Saxena
Investing.com --The Canadian dollar weakened to a more than two-month low against its U.S. counterpart today, as the loonie contended with a triple whammy today: risk-off sentiment in equities a decline in crude prices, and weak economic data. Meanwhile, hawkish minutes from the Federal Reserve supported treasury yields and the US dollar.
In economic data, Canadian housing starts slipped by 10% in July compared with June, which Marc Desmoreux principal economist at Desjardins notes adds to "downcast indicators suggest the painful medicine of higher interest rates is working to cool down economic growth and bring price pressures to heel"; and which are likely to keep the Bank of Canada on the sidelines in September.
Separate data also showed that wholesale trade fell by 2.8% in June from May.
The crude-linked loonie was also pressured by a decline in crude prices, which are dealing with the prospect of three-year high US production in addition, a large drawdown in US stockpiles, and a deteriorating demand prospect as China's economy weakens.
Meanwhile, the US dollar gained against a basket of currencies as the Federal Open Market Committee (FOMC) released July monetary policy minutes with a distinctly hawkish bent. The minutes expressed that inflation risks remain tilted to the upside, and that further rate hikes could be necessary.
On a technical level for the pair, analysts at Forex Live note, "On the daily chart below, USD/CAD has confirmed a breakout above the falling trendline from March. This is offering an increasingly bullish technical bias. From here, immediate resistance is the 61.8% Fibonacci retracement level at 1.3568. A confirmatory upside push from there subsequently places the focus on the April high of 1.3668."
"In the event of a turn lower, immediate support appears to be the midpoint of the Fibonacci retracement level at 1.3477. Just below that is that former falling trendline, which could hold as new support. If not, extending a drop through the trendline offers an increasingly bearish technical bias, opening the door to a revisit of the 1.3093 – 1.3139 support zone."