USDCAD recently broke out of its range and reached the 1.3450 minor psychological resistance before pulling back down to the broken resistance.

Applying the Fib tool on the latest swing low and high shows that the 38.2% level is close to the area of interest and might keep losses in check.

If so, USDCAD could head back to the swing high or much higher. However, the 100 SMA is still below the longer-term 200 SMA on this time frame so the path of least resistance is to the downside. Stochastic is indicating oversold conditions and is turning higher, though, suggesting that bullish pressure could return. A bit of bullish divergence can be seen as well since price made higher lows while stochastic had lower lowers.

Economic data from the US turned out stronger than expected as the trade balance printed a narrower deficit due to stronger export activity. As for Canada, its trade balance slipped from a surplus of 0.4 billion CAD to a deficit of 1.0 billion CAD.

The FOMC minutes are up for release in the US trading session and hawkish remarks could allow the dollar to regain ground. On the other hand, disappointment over the lack of conviction when it comes to future rate hikes could mean losses for the US currency.

The US ISM non-manufacturing PMI and ADP non-farm employment change are also lined up, and these could provide hints on how the NFP report due on Friday could turn out. Meanwhile, US crude oil inventories data could show a draw of 0.1 billion barrels in stockpiles which might be positive for crude oil and the correlated Loonie.

By Kate Curtis from Trader’s Way