USDCAD is still sitting right on the rising trend line visible on the longer-term time frames, still deciding whether to make a bounce or a break. Price appears to be drawing support around the 1.3500 handle, which lines up with a previous resistance area.
For now, the 100 SMA is above the 200 SMA, confirming that the long-term climb is likely to resume. In addition, both RSI and stochastic are indicating oversold conditions, which suggests that sellers are taking a break and about to let buyers take over.
If so, USDCAD could move back up to the previous highs past the 1.4600 handle. On the other hand, a break lower could find support at the 200 SMA or 1.3250 area and a drop below this could mark the start of a downtrend.
Hopes of an oil production cap among OPEC and non-OPEC leaders are still keeping the Loonie supported for now, although the meeting isn’t set to take place until later on next month. Still, any announcement of a coordinated plan of action could mean a trend line break for USDCAD.
Data from the US has been mostly stronger than expected, though, with the Q4 preliminary GDP reading upgraded from 0.7% to 1.0% instead of being downgraded to 0.4%. Personal spending and income have both beaten expectations as well, reviving hopes of a Fed rate hike for March.
Up ahead, the Canadian GDP release and the US NFP report might serve as strong catalysts for either a bounce or a break. Upbeat US jobs figures could lead to a quick rally, although Fed policymakers have already specified that they’re focusing more on inflation trends these days.
In any case, risk sentiment could also prove crucial for USDCAD price action, as Chinese PMI releases are also due this week and strong data could mean more risk-taking.
To contact the reporter of the story: Samuel Rae at firstname.lastname@example.org