(Adds comment, updates prices) By Gertrude Chavez-Dreyfuss July 16 (Reuters) - The Canadian dollar drifted higher against the U.S. currency on Monday, benefiting from the greenback's overall weakness, but the outlook remained tilted to the downside amid global trade tensions with the United States and the European Union. "This is mostly U.S.-dollar driven," said Mazen Issa, senior FX strategist at TD Securities in New York. "It's also the summer lull so we're seeing pretty much range-bound trading." In the afternoon session, the U.S. dollar was down 0.1 percent at C$1.3141 against the Canadian unit. So far this year, the Canadian dollar has been down 4.3 percent against what has been a resurgent greenback. The U.S. dollar-Canadian dollar currency pair, however, has a short-term bearish technical outlook, drifting toward the lower end of its recent range between the mid-C$1.3000 and $1.3220 area. Scotiabank in a research note said the pair's daily momentum indicators are close to neutral and trend strength gauges are currently muted. Against other currencies, such as the euro and sterling, the Canadian mostly underperformed on the day. The U.S. dollar was down 0.3 percent against a basket of currencies at 94.490 , following a slight rebound in risk appetite. TD's Issa said the Canadian dollar's fundamental outlook remained downbeat as global trade factors continued to weigh on the currency, adding that the market has yet to fully price in this risk for the Canadian currency. Last Friday, Italian Deputy Prime Minister Luigi Di Maio said Italy will not ratify the European Union's free trade agreement with Canada. The Comprehensive Economic and Trade Agreement needs to be approved by all 28 EU member states to take full effect. Canada is also embroiled in its own trade dispute with the United States amid protracted talks to revamp the North American Free Trade Agreement. The commodity-based Canadian dollar could also be subject to price movements in the oil market, analysts said. U.S. crude futures were down 4.6 percent at $67.72 , which should keep a lid on the Canadian dollar's gains. After the Bank of Canada raised interest rates last week, investors are looking to this week's inflation and retail sales data to gauge whether one more rate hike is possible this year. TD's Issa said there's about a 60 to 65 percent chance of a Canadian rate increase in December. Meanwhile, Canadian government bond prices were lower across much of the yield curve in sympathy with U.S. Treasuries. The two-year yield was up at 1.932 percent, while the 10-year rose to 2.141 percent from 2.133 percent late on Friday. (Reporting by Gertrude Chavez-Dreyfuss in New York Editing by Susan Thomas and Sandra Maler)
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