CANADA FX DEBT-Canadian dollar weakens as market positioning dominates trading
By Fergal Smith
TORONTO, Feb 4 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Wednesday as the greenback posted broad-based gains and data showed the downturn deepening in Canada's services economy.
The loonie CAD= was trading 0.2% lower at 1.3670 per U.S. dollar, or 73.15 U.S. cents, after moving in a range of 1.3629 to 1.3684.
"There is really only one driver right now, and that is about market positioning and basically a technical correction after the big leg down (in USD-CAD) we had," said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. "I think that means that dollar-Canada has got more room to go. ... If we get above 1.37 we go up to 1.3750-60. The momentum indicators are only just turning."
Speculators have slashed their bearish bets on the Canadian dollar to the lowest level in nearly two years, the most recent data from the U.S. Commodity Futures Trading Commission showed. 1090741NNET
Canada's services economy contracted for a third straight month in January as trade uncertainty contributed to declines in activity and new business, S&P Global's Canada services PMI data showed. The headline Business Activity Index fell to 45.8 last month from 46.5 in December.
Separate data showed that Greater Toronto Area home sales fell in January by the most in 11 months and prices declined. Toronto is Canada's most populous city.
Canadian employment data for January, due on Friday, could provide further clues on the state of the domestic economy. Analysts forecast a jobs gain of 5,000.
"In my mind, the jobs data could be some headline risk but the market has a deep conviction that the Bank of Canada is on hold for the next six months," Chandler said.
The U.S. dollar .DXY rose against a basket of major currencies, extending its gains since President Donald Trump's selection of former Federal Reserve Governor Kevin Warsh to be the next Fed chair.
The Canadian 10-year yield CA10YT=RR eased 1 basis point to 3.435% after touching on Tuesday a four-week intraday high of 3.466%.
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