USDCAD seems to be tired from its uptrend, as a reversal pattern can be seen on its 4-hour time frame.

Price is forming a head and shoulders formation and is gearing up to test the neckline at the 1.3000 major psychological level. A break below this su25pport area could send the pair down by around 200-250 pips, which is roughly the same height as the chart pattern. 

Still, the 100 SMA is above the longer-term 200 SMA so the path of least resistance could be to the upside. In addition, the 200 SMA is currently holding as a dynamic support level. At the same time, stochastic is heading up from the overbought region, which means that buyers are taking control of price action. In that case, USDCAD could make its way up to the previous highs from 1.3200-1.3235. 

The US dollar seems to be shrugging off positive economic data so far this week, as traders are looking for stronger improvements after the NFP printed a very upbeat reading. The US economy has shown better than expected figures for non-farm productivity, unit labor costs, and JOLTS job openings but the dollar has been mostly weaker. 

Traders are likely pricing in expectations of weaker US retail sales data for Friday, with analysts expecting to see a 0.4% gain in the headline figure and a 0.2% uptick for the core figure. This would be slower compared to the previous month’s gains in consumer spending. 

As for the Loonie, crude oil prices have been weaker again yet the oil-related currency has chalked up some gains. The EIA report showed a buildup of 1.1 million barrels in stockpiles versus the estimated draw of 1.3 million barrels while US oil rig counts have risen for the sixth consecutive week. Only Canada’s NHPI is up for release today while the US has initial jobless claims and import prices data lined up. 

By Kate Curtis from Trader’s Way