USDCAD recently made an upside breakout from its symmetrical triangle pattern, signaling that buyers have taken control of price action. However, the rally was cut short at the 1.3200 area and a correction seems to be taking place.
Applying the Fib tool on the latest swing high and low on the 4-hour time frame shows that the 50% level lines up with the broken triangle resistance at the 1.3050 minor psychological mark, which might now hold as support. A larger correction could last until the 61.8% Fib or the 1.3000 level, which is closer to the dynamic support at the 100 SMA.
The 100 SMA is above the 200 SMA so the uptrend could carry on. In addition, the gap between the moving averages is widening so bullish momentum is strengthening. However, stochastic is pointing down, hinting that sellers are on top of their game for now and that buyers might wait until the oscillator reaches the oversold area.
Event risks for this setup include the FOMC statement, during which policymakers are expected to keep interest rates unchanged. There is no scheduled press conference after this announcement so traders will be taking a closer look at the official statement to see if any shift in bias was made. Cautious remarks could dash hopes of a rate hike for the year while hawkish comments could mean another round of gains for the US dollar.
Data from the US economy has been mostly upbeat, with the CB consumer confidence, Richmond manufacturing index, and new home sales figures beating expectations. US durable goods orders data are also due today, with the headline figure expected to show a 1.1% decline and the core figure estimated to print a 0.3% uptick.
As for the Canadian dollar, weak crude oil prices have weighed on its price action recently while traders price in expectations of a buildup in stockpiles. US crude oil inventories data is due today and a reduction of 2.1 million barrels could be reported, likely easing fears of an oversupply and providing support for the oil-related Loonie.