* Canada July retail sales slip unexpectedly
* Oil price turnaround pressures C$
* C$ falls to 96.69 U.S. cents, bonds remain firm (Adds details, analyst comment)
TORONTO, Sept 22 (Reuters) - The Canadian dollar slid against the U.S. currency on Wednesday, pressured by a reversal in the price of oil and renewed fears that the domestic economy is stumbling after disappointing retail sales data.
Data showed Canadian retail sales fell unexpectedly in July, the fourth straight month of flat or declining sales. The slide suggest the consumer is no longer one of the main drivers of the recovery and could give the Bank of Canada another reason to take a break from its interest-rate increases.
A stronger price of oil had earlier wiped out the currency's data-related losses, but then became a pressure point when oil reversed its gains after inventory data showed a rise in crude and oil product stocks. [O/R]
It rebounded but never matched a six-week high hit overnight at C$1.0191 to the U.S. dollar, or 98.13 U.S. cents. At 1:13 p.m. (1713 GMT), the currencywas at C$1.0342 to the U.S. dollar, or 96.69 U.S. cents, down from Tuesday's finish at C$1.0268 to the U.S. dollar, or 97.39 U.S. cents.
"The Canadian dollar rally ended rather abruptly," said Michael O'Neill, managing director at Knightsbridge Foreign Exchange.
"It failed spectacularly at C$1.02 in part because of (an) option barrier being defended. Disappointing retail sales data added to the sentiment and widespread selling of Canada against the crosses."
Statistics Canada said total retail sales in July edged 0.1 percent lower, instead of the 0.6 percent rise expected by the market. The June retail sales figure was also revised lower to show a flat reading versus the 0.1 percent gain Statscan initially estimated. [ID:nN22229778]
"Overall, it was just a very soft data release and it followed already two other weak data releases for July -- wholesale sales and manufacturing sales," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
"July is setting up to be a quite disappointing month and next week's GDP numbers will probably confirm that it's a pretty slow start to the third quarter."
The retail figures prompted market players to further price out chances of more hikes by the Bank of Canada, providing a boost to government bond prices.
Market pricing, as measured by a Reuters calculation of yield on overnight index swaps, indicated about a 76 percent likelihood of no change in interest rates at the Bank of Canada's policy-decision date next month, up from around 64 percent on Tuesday afternoon.
The two-year bond was up 1 Canadian cent to yield 1.454 percent, while the 10-year bond gained 45 Canadian cents to yield 2.845 percent. (Reporting by Ka Yan Ng; editing by Rob Wilson)
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