Canadian dollar rally stalls ahead of 200-day moving average

By Fergal Smith

TORONTO (Reuters) -The Canadian dollar edged lower against its U.S. counterpart on Tuesday, pulling back from an earlier seven-week high, as investors grew cautious ahead of a key level of technical resistance for the currency.

The Canadian dollar was trading 0.1% lower at 1.3450 to the greenback, or 74.35 U.S. cents, after earlier touching its strongest intraday level since Feb. 16 at 1.3407.

Gains for the currency in recent days follow a calming in financial markets as stress in the global banking sector showed signs of easing.

"It is really a moderation of the volatility that has allowed the CAD to perform reasonably well recently," said Mazen Issa, senior FX strategist at TD Securities.

"And now we're at a level that technically it looks like it could have run its course, so I would be a bit more hesitant to try and chase more gains from here."

The rally stopped short of the 200-day moving average for USD-CAD at about 1.3380.

The price of oil, one of Canada's major exports, added to Monday's sharp rally on OPEC+ plans to cut more production. U.S. crude prices settled 0.4% higher at $80.71 a barrel.

The value of Canadian building permits jumped 8.6% in February compared to the previous month, after a revised 3.7% decline in January.

Canada's trade balance for February, due to be reported on Wednesday, and the March employment report, set for release on Thursday, could offer further clues on the state of the domestic economy.

Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries.

The 10-year eased 7.3 basis points to 2.778%, while the gap between it and its U.S. equivalent narrowed by 1.3 basis points to about 57 basis points in favor of the U.S. bond. That was the smallest gap since Feb. 27.

(Reporting by Fergal Smith; Editing by Paul Simao)