USDCAD keeps trending lower and is moving inside a descending channel pattern on its 1-hour time frame. 

Price is currently testing support near the 1.2550 minor psychological level and could be due for a bounce back to the resistance near 1.2600. 

Stochastic is heading down to show that there’s still some selling pressure left. If sellers are strong enough, they could push for a break of the channel support, triggering a steeper selloff for USDCAD. 

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the downtrend is more likely to carry on than to reverse. 

Economic data from Canada came in mostly in line with expectations last Friday, except for the core retail sales figure which showed a 0.1% dip instead of the estimated flat reading. Headline retail sales beat expectations with a 0.6% gain, twice as much as the projected 0.3% uptick.  

Dollar demand remains weak as traders are starting to price in less hawkish expectations from the FOMC statement this week. Although the minutes of their earlier meeting reflected confidence in their outlook, the latest batch of reports and developments could cloud their optimism.

Traders are also hoping to get more details on the balance sheet runoff and confirmation that it would start later this year could weaken expectations of another interest rate hike in September. Discussions among OPEC and non-OPEC leaders are reportedly scheduled within the day and this could impact Loonie price action as well.

By Kate Curtis from Trader’s Way