USDCAD bounced off long-term support around the 1.3100 major psychological level recently and seems to be setting its sights on the top of the range at the 1.3550 minor psychological mark.

Price has already moved past the middle of the range, indicating that buying momentum is strong.

Also, the 100 SMA is above the longer-term 200 SMA on the daily time frame so the path of least resistance is to the upside. In addition, the 100 SMA dynamic support is right around the middle of the range, adding to its strength as a potential near-term support area.

Stochastic is in the overbought zone, which means that buying pressure could fade soon and that the range resistance could keep gains in check. In that case, a selloff back to the support near the 200 SMA dynamic inflection point could happen later on.

Last Friday, several FOMC members gave testimonies, most of which confirmed that an interest rate hike could be on the table this month. If so, the dollar could extend its rally across the board as the US central bank stays on track towards tightening three times this year. 

However, this could all depend on the NFP report due on Friday as policymakers are still going to base their decision on whether or not the momentum in hiring and inflation is sustained. Analysts are expecting to see a 185K increase in hiring for February, slower than the earlier 227K gain. 

As for the Canadian dollar, the BOC statement was slightly more dovish than expected as Poloz reiterated that they are open to the idea of further cuts and that the pickup in price levels and employment could be temporary. Canada is also set to print its jobs report on Friday.

By Kate Curtis from Trader’s Way