USDCAD is trending higher on its long-term and short-term charts, moving inside an ascending channel on its 1-hour time frame. Price dipped below the channel support but spiked right back up, indicating that buyers are putting up a fight.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. In that case, USDCAD could move back up to the channel resistance at the 1.3300 major psychological level or higher. However, the gap between the moving averages is narrowing so a downward crossover might take place.
If that happens, selling pressure could pick up and trigger a break of the support at the 1.3100 major psychological level. Stochastic is on the move up to show that buyers are in control of price action but the oscillator is nearing the overbought region to reflect buyer exhaustion.
The Bank of Canada kept interest rates on hold at 0.50% as expected but Governor Poloz admitted that policymakers have “actively discussed” the idea of additional stimulus. The central bank also lowered its 2016 GDP forecast from 1.3% to 1.1% on weaker export activity.
In crude oil news, the EIA report showed a surprise draw of 5.2 million barrels from stockpiles, easing fears of an oversupply and driving crude oil back up again. Later on in the week, Canada is set to print its retail sales and CPI figures, which might underscore the BOC’s dovish tone.
As for the dollar, US reports were mixed, as building permits beat expectations with a gain from 1.15M to 1.23M while housing starts fell from 1.15M to 1.05M instead of rising to 1.18M. US existing home sales are lined up, along with the Philly Fed index and the initial jobless claims.