USDCAD has formed lower highs and found forex support at the 1.2400 major psychological level, creating a descending triangle chart pattern on its 1-hour forex chart. For now, price is hovering around the formation’s bottom, while stochastic is edging towards the oversold zone.
If the oscillator starts moving out of the oversold area, price could make a bounce off forex support and head back to the top of the triangle around 1.2600. If this continues to hold as resistance, another test of support is possible.
Forex Support Breakout
However, major events for this week might lead to a breakout in either direction. Among these are the FOMC minutes, which should shed more light on what the US central bank has in mind in terms of policy changes. Hawkish remarks could renew speculations that the Fed might hike interest rates later this year, which could lead to a strong bounce or potential upside break for USDCAD.
On the other hand, cautious comments could support risk appetite, as this would assure that easy US monetary policy might continue to keep global growth afloat. US banks are on holiday for today though, which means that a bit of consolidation around the forex support is possible before any strong moves are seen.
Later in the week, Canada is set to release its retail sales figures and possibly show weak readings once more. After all, their latest jobs data turned out to be a disappointment, which might have weighed on consumer spending for the same period.
Risk appetite is also likely to play a major role in price action for the week, as higher-yielders have recently drawn support from subsiding geopolitical tension in Russia and the pickup in commodity prices. Should this behavior be reversed in the coming days, the Loonie might stand to lose ground against the dollar once more.
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