USDCAD has been trending higher on its short-term time frame, moving above a rising trend line connecting the latest lows of price action on the 1-hour chart. 

Price appears to be hitting a resistance at the 1.3150 minor psychological level, creating the opportunity for a pullback play.

Using the Fib tool on the latest swing high and low shows that the 61.8% level lines up with the trend line and the 200 SMA. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside and the rally is likely to carry on.  

Stochastic is on middle ground, barely offering any strong directional clues. RSI is also treading sideways so consolidation could be in play. If any of the Fib levels hold as support, USDCAD could revisit its previous highs at 1.3150 and even create new ones.

Event risks for this setup include the BOC interest rate decision. Analysts aren’t expecting any changes from the 0.50% benchmark rate, although dovish remarks could be made since Canada’s trade and consumer sector have lagged in the past few months. BOC Governor Poloz could also discuss the impact of the wildfires in Alberta.

As for the US, only the flash services PMI is due. A climb from 52.8 to 53.1 is expected, indicating a pickup in industry growth. US crude oil inventories data is also due today and a drop of 1.7 million barrels is expected.

Market sentiment could continue to influence this pair’s trends, although profit-taking ahead of the BOC announcement could be seen, taking USDCAD for a significant correction from its uptrend.

By Kate Curtis from Trader’s Way