USDCAD has been moving sideways for quite some time, but the pair seems to have formed lower highs on the 1-hour time frame. Price is also finding support at the 1.3150 minor psychological level, creating a descending triangle pattern.
The pair is currently testing the top of the triangle, which might continue to hold as resistance. The moving averages are crossing back and forth, suggesting that the range-bound action could continue. In addition, stochastic is already in the overbought zone, which suggests that a selloff might take place.
In this week’s rate statement, the BOC decided to keep interest rates on hold at 0.50%. The central bank acknowledged that the financial risks in China have contributed to falling commodity prices but that the Loonie’s depreciation is helping keep the downside risks in check. In addition, the BOC also noted that their rate cuts earlier this year are helping keep growth supported.
In addition, oil prices have recovered recently after the OPEC showed willingness to adjust production levels. This could provide an additional boost to the positively-correlated Loonie and less demand for the safe-haven dollar. Crude oil inventories data is due today and a buildup in stockpiles might limit oil price gains.
As for the US, the initial jobless claims and import prices data could pose event risks. Jobless claims could fall from 282K to 279K while import prices could show a 1.7% drop.