USDCAD has been trading in an ascending channel on its 4-hour time frame but might encounter resistance on this uptrend soon. Price is making its way towards the top of the channel at the 1.3200 major psychological level, which might hold as a short-term ceiling.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside and the pair could have enough momentum for a test of the channel resistance. However, stochastic is nearing the overbought zone, suggesting that buyers might need to take a break soon and let sellers take over.

If so, USDCAD could head back to the bottom of the channel around the 1.3000 major psychological level. This is also near the 200 SMA, which might hold as dynamic support for this uptrend. But if bullish momentum is very strong, price could even go for an upside break from the channel resistance.

Event risks for this setup include the release of Canada’s CPI and retail sales reports in today’s US session. Headline CPI is expected to show a 0.2% gain compared to the previous 0.4% uptick while core CPI could print a flat reading versus the previous 0.3% increase. Headline retail sales could show a flat reading versus the previous 0.9% gain while core retail sales could show a 0.3% increase compared to the previous 1.3% rise.

Only the flash manufacturing PMI report is due from the US economy today and a rise from 51.3 to 51.9 is eyed. Stronger than expected data could lead to more gains for the dollar, especially since earnings reports from top US companies have been churning out upbeat results.

Aside from that, a continued decline in crude oil prices could keep weighing on the positively-correlated Canadian dollar. Fears of a supply glut are back now that production has resumed in Alberta and inventories are rising once more.

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