USDCAD has formed lower highs and lower lows inside a descending channel on the 1-hour chart and is currently testing resistance. If this keeps holding, price could resume the slide to the next support areas.

The mid-channel area of interest is around the 1.2650 minor psychological level then the channel bottom is at the 1.2550 mark. The 100 SMA is below the 200 SMA to confirm that selling pressure is in play, but USDCAD is trading above both moving averages so these could keep holding as dynamic support.

Stochastic is pointing down to confirm that bearish momentum is present, and the oscillator has plenty of room to slide before indicating oversold conditions or exhaustion among sellers. RSI is also heading south, so price could follow suit while sellers have the upper hand.

The US dollar could be in for a lot of volatility this week since the FOMC decision is coming up, and traders are keen to find out if the central bank is open for more stimulus. No actual policy changes are expected for the time being as the Fed would likely keep rates and asset purchases on hold.

A confident tone could still bolster demand for the US dollar, especially if Powell expresses optimism about working with the Biden administration.

The US advance GDP report is also lined up, and strong results might restore confidence in the US economy and demand for the dollar. Weak figures, on the other hand, would confirm that the economy was hit harder by the pandemic than initially estimated.

There are no major reports due from the Canadian economy this week, with only the monthly GDP reading on the calendar. Crude oil price action could impact the correlated Loonie while risk appetite might also boost demand for higher-yielding assets.