USDCAD is still stuck inside the descending triangle forex pattern on its 1-hour chart, as price just bounced off the bottom and is now testing the resistance. 

The top of the triangle at the 1.2600 major psychological level seems to be keeping gains in check for now and might push price back to the support at the 1.2400 major psychological level.

Stochastic is on middle ground, barely offering any clear clues at the moment. The oscillator seems to have been on the way down from the overbought zone, indicating that dollar bears are taking control. However, the indicator appears to be making an attempt to climb, which suggests the possibility of an upside break.

Last week, data from Canada was significantly weaker than expected, as the retail sales reports missed forecasts. News that the OPEC could have an emergency meeting to announce a cut in oil production sometime in the next few weeks have been keeping oil prices and the Loonie supported for now.

Should the oil cartel refrain from meeting or announcing a reduction in supply, oil prices could see further downside and drag the Canadian dollar along. Canada’s economy is heavily dependent on crude oil, as commodity price declines would mean lower revenues for its export sector.

Other event risks for this setup include the Canadian CPI release later on during the week. The report is slated to show further declines in consumer inflation, which might mean more weakness for the currency. As for the US dollar, Fed head Yellen’s testimony during the middle of the week might also result to significant moves.

Risk appetite has also been responsible for the dollar’s movement lately, as markets are still tuned in to the updates on the Greek debt negotiations. A four-month extension has been granted, although the EU still has to approve the latest list of reforms passed by the anti-austerity Greek government.

By Kate Curtis from Trader’s Way