USDCAD has formed lower highs and found support around 1.2675, creating a descending triangle on its short-term time frames. Price has just bounced off the triangle bottom and is making its way back to the top around 1.2750-1.2775.
The 100 SMA has crossed below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This means that the resistance is more likely to hold than to break.
Stochastic is still heading north to reflect the presence of bullish momentum that might take price up to the triangle resistance. But if buyers are strong enough, they could push for an upside break and 200-pip climb, which is roughly the same height as the chart formation.
The main event risk for the Loonie might be the OPEC meeting as the cartel is widely expected to announce an extension of their output deal. However, since this scenario has been long priced in, profit-taking could ensue during the actual event and force the oil-related currency to retreat.
Meanwhile, the dollar has the US preliminary GDP on deck and any major revisions could dictate its direction. Traders are also waiting for more updates on tax reform as lawmakers reconvene to discuss the proposal.
Canada also has its jobs data due later in the week and stronger than expected data could keep the currency supported. Downbeat results, on the other hand, could lead to losses as traders continue to push back rate hike expectations.