USDCAD has been trending lower, moving inside a descending channel pattern on its 4-hour time frame. Price is now making its way close to the channel support near the 1.2700-1.2750 and might be due for a bounce.
If so, USDCAD could climb back up to the channel resistance around 1.3000-1.3050. This is also near the 100 SMA, which might hold as a dynamic resistance level. However, the 100 SMA is below the 200 SMA so the path of least resistance is still to the downside.
Stochastic is already indicating oversold conditions, which suggests that a bounce might be possible. Once this oscillator starts turning higher, bullish momentum could come back in play. On the other hand, if sellers stay in control, a downside break of support and a sharper selloff could take place.
The main catalyst for this trade today is the upcoming BOC statement, during which Canadian central bankers are expected to keep interest rates unchanged. BOC policymakers have sounded optimistic in their previous statements, citing the shift to less dependence on energy exports and a pickup in business sentiment and consumer spending.
Another round of upbeat remarks from BOC officials could drive the Loonie higher against the US dollar while comments against the currency’s appreciation could force it to return some of its recent gains. Oil prices could also have a significant impact on this pair’s action, as rumors that an oil output freeze agreement has been made between Russia and Saudi have boosted prices yesterday.
As for the US dollar, PPI and retail sales data are up for release today. Headline consumer spending is projected to rise by 0.1% while core retail sales could show 0.4% growth. Headline PPI is slated to rise by 0.3% while core PPI could post a 0.1% uptick.