USDCAD once again bounced off the top of its range on the 4-hour time frame and could be due for a move back down to support at 1.2675. Stochastic is heading south to show that sellers are on top of their game, but the oscillator is also dipping into oversold territory to reflect exhaustion.
The 100 SMA is above the longer-term 200 SMA also, so the path of least resistance is still to the upside. This means that an upside break from the resistance around 1.2900 is still a possibility. The 100 SMA could also hold as near-term dynamic support while the 200 SMA lines up with the area of interest at the middle of the range.
An upside break could lead to a climb of around 225 pips or the same height as the chart formation. Similarly a downside break on a strong return of selling pressure could lead to a drop of the same height.
The US government is on its way to enact tax reform, which is seen to provide a strong boost to business activity and overall growth in the coming months. This also marks the first major legislative victory of the Trump administration, reinforcing confidence in US economic standing.
Canada has its CPI and retail sales reports lined up later today and strong data could keep traders hopeful about a BOC hike sometime next year. On the other hand, downbeat results could remind market watchers that the central bank is treating future policy action with more caution this time.