USDCAD has been trending lower on its 4-hour time frame, moving inside a descending channel. Price is currently testing the channel resistance and might be due for a move lower.
Stochastic is indicating overbought conditions so buyers are already feeling exhausted. RSI is also in the overbought area and is turning lower, which suggests that selling pressure is building up.
In addition, the 100 SMA is below the 200 SMA so the path of least resistance is to the downside. The 200 SMA lines up with the top of the channel and the 1.2900 major psychological level, which might be the line in the sand for this downtrend. A break above this level could lead to a reversal, but if it holds a drop towards support at 1.2400 could be seen.
Forest fires in Alberta have resulted to the evacuation of several oil company employees in the area, as well as the closure of mining and production operations in the oil-rich province. It didn’t help the Loonie that the Canadian trade deficit widened from 2.5 billion CAD to 3.4 billion CAD instead of narrowing to the projected 1.4 billion CAD shortfall.
There are no reports due from Canada today, leaving traders to price in expectations for the Canadian jobs report on Friday. Analysts are expecting to see a small gain of 0.2K but leading indicators are suggesting a possible upside surprise.
The US is also set to print its April jobs report on Friday, with the consensus at a smaller 203K increase compared to the earlier 215K gain. Leading jobs indicators are giving mixed signals, as the ADP figure came in at just 156K but the jobs components of the ISM surveys showed improvements.
Still, it might take a much stronger than expected NFP reading for the dollar to sustain its climb since traders are already pricing against a Fed rate hike in June.
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