USDCAD has formed higher lows and found resistance at the 1.3200 major psychological level, creating an ascending triangle pattern on its 4-hour time frame.

Price is currently testing the resistance, still deciding whether to go for a bounce or a break.

The moving averages are oscillating, which suggests that the consolidation could continue and that price could head back to the support near 1.2925. However, the 100 SMA seems to be crossing above the 200 SMA to indicate that the path of least resistance is to the upside. If so, a break higher could take place and bring USDCAD up by around 700 pips or the same height as the chart formation.

Stochastic seems ready to head down from the overbought zone to show a return in selling pressure. In that case, the resistance could still hold and force the pair to make its way back to the bottom of the pattern or even go for a breakdown.

Market catalysts for today could determine where this pair might be headed, as the US is set to print its retail sales and PPI reports. Headline retail sales could fall by 0.1% while core retail sales could increase by 0.3%, with weaker than expected data likely to dampen Fed rate hike hopes for next week.

Headline PPI and core PPI are both expected to print 0.1% gains. Import prices data released yesterday showed a sharper than expected 0.2% drop versus the projected 0.1% dip, likely adding downside pressure on producer prices. Other reports due from the US are the Philly Fed index, industrial production, current account balance, and initial jobless claims.

There are no major reports from Canada, leaving oil prices and market sentiment as the main drivers of price action. The recent US EIA oil inventories report showed a drop of 0.6 million barrels in stockpiles instead of the projected rise of 2.8 million barrels, but this failed to keep crude oil prices supported for very long.

By Kate Curtis from Trader’s Way