USDCAD is in a steady uptrend on its 1-hour forex chart, as the pair is still moving inside an ascending channel. Price is moving close to testing the channel support around the 1.3100 major psychological mark and may be due for a bounce.
Stochastic has reached the oversold zone and is turning higher while RSI is also on the move up. These suggest that buying pressure is building up and that further gains are possible. If the channel bottom holds as support, USDCAD could move back to the resistance at 1.3400.
In addition, the 100 SMA is safely above the 200 SMA, confirming that the path of least resistance is to the upside. Stronger bullish pressure might even lead to an upside break past the channel resistance. On the other hand, a move below 1.3100 could indicate that a reversal is underway.
USDCAD Fundamental Factors
The US just printed a stronger than expected preliminary Q2 GDP report, as the figure was upgraded from the initial 2.3% estimate to 3.7% growth. Components of the report showed a pickup in government spending, consumption, and business investment. However, the rise in inventories could prove to be worrisome since this might force companies to hold back production to prevent stockpiles from building up.
Meanwhile, oil prices showed a strong rebound after seeing the US GDP report, also allowing the Canadian dollar to regain ground on risk appetite. These gains might prove to be short-lived since there is still significant downward pressure on oil prices. Keep in mind that OPEC has declined to reduce production while US oil producers are also sustaining operations, possibly leading to another supply glut.
Event risks for this setup today include the release of the core PCE price index from the US, which is expected to show a 0.1% decline in price levels and remind USDCAD traders that the Fed isn’t likely to hike rates in September.
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