USDCAD was previously trading inside a rectangle pattern, which turned out to be a triple top reversal formation when price broke to the downside.

The chart pattern is approximately 250 pips tall, so the resulting selloff could be of the same height. 

Stochastic is already indicating oversold conditions, though, which means that sellers need to take a break and let buyers take over. If so, a pullback to the broken support around 1.2650 minor psychological level could be seen before the downtrend resumes. 

The 100 SMA is still above the longer-term 200 SMA, so the path of least resistance is to the upside. However, the gap between the moving averages has narrowed, so a downward crossover might be possible soon. 

US data turned out mixed this week, as pending home sales posted a higher than expected 0.2% gain while the CB consumer confidence reading fell short of estimates. The index slipped from 128.6 to 122.1 versus the estimated 128.2 figure to reflect weaker optimism. 

Meanwhile, the Loonie drew a boost from a crude oil rally following news that a pipeline in Libya has been shut down. This could lead to lower output from the OPEC member nation, which has already seen plenty of dips owing to the conflict in the area.

US crude oil inventories data are up for release next and a draw of 3.9 million barrels is eyed. This would be less than the earlier draw of 6.5 million barrels but a reduction nonetheless. 

By Kate Curtis from Trader’s Way