* C$ closes at C$0.9537, or $1.0485
* Currency stumbled after weak retail sales data
* Bonds mostly firmer across curve
* Next major technical level seen at C$0.9430 (Updates details, adds analyst comment)
By Solarina Ho
TORONTO, April 21 (Reuters) - The Canadian dollar closed slightly lower against the greenback on Thursday, with many traders selling to lock in gains on long positions after the currency soared to a 3-1/2 year high earlier in the day.
The Canadian unit jumped as high as C$0.9455 to the U.S. dollar, or $1.0576, early in the session, the highest level since November 2007. The move was part of broad-based decline in the U.S. currency that took it close to an all-time trough against major currencies. [FRX/]
But the Canadian dollar pared gains throughout the day, with traders moving to close out positions ahead of the Good Friday/Easter holiday long weekend.
"You had a really good push down in broad U.S. dollar rates for the week and obviously people are going, 'That's it, I'm booking my profits and going home for a very long weekend,'" said John Curran, senior vice president at CanadianForex.
"The market has set itself up for further U.S. dollar weakness ... but it's probably going to be overdone in the short term."
The Canadian dollar CAD=D4 finished at C$0.9537 to the U.S. dollar, or $1.0485, weaker than the C$0.9533 to the U.S. dollar North American close on Wednesday.
The Canadian dollar also stumbled after data showed retail sales in February rose a less-than-expected 0.4 percent, with the bulk of the gains coming from gasoline stations. CARSLS=ECI ECONCA
Yet many analysts and traders said the currency still seemed to be on a strengthening trend that would take it closer to the modern-day high it reached it reached in November, 2007. That month it hit C$O.9059 to the greenback, or $1.1039, according to Thomson Reuters dealing data.
"(Retail sales data) is really not affecting too much of the trend here. This is going to continue on for some time," said C.J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets.
"I do think retail sales number is being pushed aside for the headline CPI number we got a couple of days ago."
The currency accelerated its upward march after data on Tuesday showed Canada's annual inflation rate in March jumped to its highest level since September 2008, ratcheting up pressure on the Bank of Canada to resume raising interest rates soon. [ID:nN19274146]
Expectations of higher interest rates often strengthen currencies because they tend to attract capital flows. The Bank of Canada's key policy rate is at 1 percent. The U.S. Federal Reserve continues to keep rates there near zero.
FEW C$ BARRIERS AHEAD
Having broken through the C$0.95 level, analysts say there are few technical barriers in the way of the Canadian dollar.
Gavsie was looking for C$0.9430 -- last reached in November 2007 -- as the next technical level to watch for.
Rising resource prices also provided support for the commodity-linked currency, with gold hitting a record high above $1,500 an ounce and U.S. crude maintaining levels above $110 a barrel. [O/R] [GOL/]
Canadian bonds closed firmer on Thursday. The two-year bond CA2YT=RR climbed half a Canadian cent to yield 1.806 percent, while the 10-year bond CA10YT=RR rose 30 Canadian cents to yield 3.291 percent. (Editing by Jeffrey Hodgson)