The USD/CAD dropped today and resumed the last two day’s bearish momentum. Price has squeezed a little in the last three hours and continues to stay above a very strong dynamic support.  The upcoming hours could be crucial for the USD/CAD because a valid breakdown below the 1.2655 will confirm a further drop.

The rate was driven by the fundamental factors in the last two days, but we could still have a rebound if the USDX will have enough directional energy to breakout above the 93.50 level. The USDX should pressure two very strong dynamic resistance in the upcoming hours, remains to see if will pass above.

Technically, the dollar index is somehow expected to increase in the upcoming period after the last drop, but as you already know, the rate will be driven more by the fundamental factors ahead of the FOMC Meeting, the rumors will shake the markets.

The Loonie could take the lead again as the United States data have disappointed, the ISM Non-Manufacturing PMI was reported at 57.4, much below the 59.2 estimate and below the 60.1 in the former reading period. The Trade Balance dropped further, from -44.9B to -48.7B, even if the economists have forecasted a drop only towards the -46.2B, moreover the Final Services were reported at 54.5 points, much below the 55.4 estimate.

You can see on the daily chart that the rate plunged since Friday when the Canadian data have come in better than expected and have boosted the Loonie.  Price dropped below the 1.2655 level and below the median line (ML) of the major red descending pitchfork.

The poor US data could force the rate to close below the mentioned support levels and could confirm a larger drop. Only a minor increase above the median line (ml) of the minor blue descending pitchfork will signal another increase in the upcoming period.

A further drop will approach the  1.2460 static downside obstacle and the median line (ml) of the minor red ascending pitchfork. Resistance can be found at the 1.2803 level and at the upper median line (uml) of the minor pitchfork in case of a rebound.