USDCAD appears to be forming a forex uptrend channel on its 1-hour forex chart, as the pair recently made higher lows and higher highs. Price just bounced from the 1.0950 minor psychological level, which lines up with the forex uptrend channel’s bottom, and might be on its way to test the range resistance at 1.1200.
However, stochastic is indicating overbought conditions and hinting that the mid-channel area of interest might hold as resistance for now. If that happens, USDCAD could retest the bottom of the forex uptrend channel which is closer to the 1.1100 major psychological support for now.
Forex Uptrend Forecast
A bounce from this area could still lead to a strong rally to the top of the forex uptrend channel but a breakdown could be a sign that the uptrend would reverse. Going long at 1.1100 with a stop below 1.0950 and a target of 1.1200 could yield a decent return-on-risk for a simple day trade.
The event risks for this forex uptrend setup are minimal, as Canada has the retail sales report on tap and both headline and core figures could print bleak readings. In fact, analysts are expecting to see a 0.1% decline in core retail sales while the headline figure might show a feeble 0.4% uptick following the previous 1.1% gain.
Bear in mind that latest inflation figures from Canada came in strong but BOC Governor Poloz downplayed these reports. Employment data from Canada has also been disappointing recently, increasing the odds of seeing weaker than expected spending data. Meanwhile, US data has mostly surprised to the upside and confirmed that the Fed could move closer to tightening policy.
Data due from the US include the flash manufacturing PMI and the Richmond index, both of which could continue to print impressive readings for the US economy. With that, the path of least resistance for this forex setup is to the upside.
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