USDCAD has been selling off lately but it is closing in on the rising trend line visible on the daily time frame. Price could make a test of the 1.3500-1.3600 support area, which is in line with the 61.8% Fibonacci retracement level based on the latest swing high and low.
In addition, the long-term trend line coincides with the 100 SMA dynamic support. This moving average is above the longer-term 200 SMA, confirming that the climb could carry on.
Stochastic is already indicating oversold conditions so sellers might need to take a break and let buyers take over. Similarly, RSI is nearing the oversold levels also, which suggests a potential return in buying pressure.
Catalysts for a bounce include the upcoming US NFP release, which is expected to show a 189K gain in hiring, lower than the previous 292K increase. Canada is also set to print its jobs report and might show a 5.2K rise in employment, weaker than the previous 22.8K increase.
Other possible risks include the rumored OPEC special meeting this month, as several member nations have been urging for production cuts. Arab states have stubbornly refused to give in to these calls but a possible compromise might still lift crude oil and the correlated Loonie.
The BOC hasn’t announced any plans to ease monetary policy just yet but Fed officials have suggested that they might not be able to hike rates so soon again. For now, this is keeping the dollar weak, along with the rebound in risk appetite.
By Kate Curtis from Trader’s Way