USDCAD bounced off the ascending channel support around the 1.3100 area recently and is on its way to test resistance at 1.3300-1.3350. If this area holds as a ceiling, price could head back down for another test of support.
The 100 SMA is above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. If so, price could make an attempt to break past the channel resistance and go for a sharper climb. However, stochastic is already indicating overbought conditions so sellers could take over once the oscillator heads south.
Economic data from the US has been mixed yesterday, with initial jobless claims missing expectations and the existing home sales report printing upbeat results. There are no major reports up for release from the US today.
The BOC refrained from cutting interest rates in their latest monetary policy statement but Governor Poloz hinted that officials actively discussed the idea of more stimulus. The central bank also downgraded growth and inflation forecasts for the year, citing a weaker outlook for export activity as well.
In contrast, Fed rate hike expectations for November or December are still in play, supporting the US dollar. With that, this counter trend setup could prove to be risky as an upside breakout seems possible, unless any other catalysts materialize. Canada has its retail sales and CPI figures lined up so strong readings could allow the Loonie to recover.
Crude oil price gains have been supporting the positively correlated Canadian dollar, as inventories data have shown surprise declines in stockpiles, further easing fears of an oversupply. Speculations about an oil output deal for the November OPEC meeting could continue to support the oil-related Loonie.
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