By Ketki Saxena
Investing.com -- The Canadian dollar weakened against its US counterpart today, retracing the morning’s gains along with WTI as crude closed its third week at a loss.
At the close of the North American session, the USD/CAD pair was trading at C$1.2912 to a US dollar, up +0.33% in the day’s trading and with the day’s range of 1.2823 - 1.2928.
The loonie started out the day strong against the U.S. dollar on the back of stronger than expected retail sales that - thus far - indicate resilience in consumer spending and robustness in the economy even amidst sharply rising rates. Canadian retail sales grew 2.2% in May, Statistics Canada announced this morning, beating economist expectations for a 1.6% increase.
The greenback meanwhile declined against a basket of currencies following the S&P Global (NYSE:SPGI) PMI report that showed an unexpected contraction in the service sector in July, as per preliminary data.
However, the Canadian dollar remained unable to maintain momentum against the greenback as the price of crude slumped below $95 a barrel for the first time since April, as the EU prepares to allow Russian oil to be shipped to a third country as a loophole to the bloc’s self-imposed sanctions.
Crude also continues to be pressured by slowing U.S. demand and easing supply concerns on the resumption of Libyan output and spare capacity from Iraq.
However, the Canadian dollar is set to close the week on a positive note against its U.S. counterpart, following the loonie’s rebound last week.
FX street notes that “The CAD has rebounded over the past week resulting in USD/CAD dropping back below the 1.2900 supported by the rebound in global equity markets. USD/CAD has had one of the strongest correlations with global equity market performance amongst G10 FX pairs. At the current juncture, we view this equity market rebound as most likely a bear market rebound.”
Looking forward for the USD/CAD pair, FX Street notes that “immediate long-bias may be vulnerable while below. From a trading standpoint, a good zone to reduce long-exposure / raise protective stops – losses should be limited to the 1.2784 IF price is heading higher on this stretch.”
The major event to provide further direction for the pair will be the U.S. Federal Reserve's policy meeting next week, where a 75 bps hike is widely expected.