His forced effect reads:

Forced : When Daechanar is dealt damage, if there is at least 1 Sorcery card in play, cancel all damage just dealt and remove a Sorcery card from the game.

Can you remove a Sorcery card from the game that is in the encounter deck or discard pile or must it be one of the in play Sorcery cards?

Edit: I think you cannot remove one from the deck or discard pile because you are not allowed to interact with cards in an out of play state unless explicitly told to do so, right?

I think you cannot remove one from the deck or discard pile because you are not allowed to interact with cards in an out of play state unless explicitly told to do so, right?

Correct. Core rules, p. 25: "Card effects do not interact with cards in an out of play state unless the effect specifically refers to that state." (This also applies to the victory display.)

I do find the illegal idea of using Ride to Ruin to discard whatever Rohan ally from your deck to place 3 progress tokens pretty amusing, though.