USDCAD has been moving sideways on its 1-hour forex chart, finding resistance at the 1.3310 level and support at 1.3160. The pair is on its way to test the range support and might be due for a bounce, as stochastic is already indicating oversold conditions. If so, a bounce back to the range resistance might take place.
Take note, however, that the 100 SMA is below the longer-term 200 SMA, which means that the path of least resistance is to the downside. In that case, a break below the range support could be possible, pushing USDCAD to the next floor around the 1.3000 major psychological level.
The main event risk for this trade is the BOC interest rate decision, during which Governor Carney is expected to keep interest rates on hold at 0.50%. The BOC already cut interest rates twice this year and might sit on its hands this time, especially since oil prices have begun to recover. In that case, a break below the bottom of the range might be seen.
On the other hand, dovish remarks or a rate cut might mean more losses for the Canadian dollar, possibly allowing the range support to hold. Note that the BOC typically acts preemptively in order to prevent worse losses from the oil price slump, reducing the negative effects on Canada’s energy sector.
Other potential catalysts include the Canadian building permits report, which might show a 4.7% decline after rising by 14.8% in the previous month. As for the US, only the JOLTS job openings report is lined up and this might just have a minimal impact on the dollar since the NFP was already released last week.