USDCAD has formed lower highs on its 1-hour chart and has been finding support at the 1.3650-1.3700 area, creating a descending triangle chart pattern.

Price appears to have found resistance at the top of the formation once more and might be due for another test of support.

The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside. If bearish pressure is strong enough, a downside break of support might even take place, taking USDCAD lower by an additional 400-500 pips, which is roughly the same height as the chart pattern. On the other hand, if the triangle bottom still holds as a floor, another bounce to the resistance at 1.3750-1.3800 might take place.

Stochastic is on the move down, which means that sellers are still in control, but the oscillator is already nearing the oversold area. RSI is also heading south and approaching the 20.0 mark, which suggests that buying pressure might return soon. 

Data from the Canadian economy came in mixed last Friday, as CPI readings came in stronger than expected but retail sales reports fell short of estimates. In the US, CPI readings came in higher than projections.

There are no major reports due from the US or Canada today, which suggests that oil headlines could influence price action. In recent reports, Iran has confirmed that they had been able to raise output by 500,000 barrels per day as promised after the Western sanctions were lifted earlier in the year. This makes it more difficult for other oil producers to commit to capping production, as larger nations have specified that they’d only cooperate if other nations do so.

With that, the path of least resistance in terms of fundamentals might be to the upside, especially since oil companies in Canada are starting to feel the pinch of falling prices. Speculations of a March hike could still keep the dollar afloat against its peers.

By Kate Curtis from Trader’s Way