The USD/CAD currency pair is facing strong resistance around the 1.3135 level following its recent surge. The pair bounced off multi-month lows recently after bottoming late last week to trade at around 1.3060.

The USD/CAD currency pair has been under downward pressure since the start of June and this appears set to continue through July unless the greenback can receive some positive sentiment from a fundamental perspective.

USD/CAD Fundamentals Overview

From a fundamental perspective, the USD/CAD currency pair is trading at the back of major US economic data with more on the way from both countries. The US Construction Spending fell 0.8% compared to the expected growth of 0.1% yesterday.

Also on Monday, the ISM Manufacturing PMI beat expectations of 51.0 points with 51.7 points while both the 3-month and the 6-month bills interest rates edged higher to 2.145% and 2.04% from 2.085% and 2.03% respectively.

And today, traders are looking forward to the Canadian Markit Manufacturing PMI, which is expected to come in at 49.0 points compared to the previous period’s 49.1 points. The US ISM-NY Business Conditions Index is also expected late in the day alongside the RedBook Index.

USD/CAD Technical Analysis (60-min Chart)

From a technical point of view, the USD/CAD currency pair is trading within a descending wedge. However, it appears to have recently made a short-term reversal that is now facing strong trendline resistance.

Given the downward pressure it faces (having recently hit an overbought level in the Relative Strength Index indicator), the bears will be more optimistic in the coming days and they will target profits at around 1.3108. On the other hand, the bulls will hope that the trendline resistance is breached by targeting profits at around 1.3212.

USD/CAD Technical Analysis (the Daily Chart)

In the daily chart, the USD/CAD currency pair appears to have recently dropped out of an ascending channel that dates back to August 2017. The last time it breached the support trendline was in early 2018, but then it made a quick recovery. 

The same recovery can be expected based on the outcome of key US economic data in the coming days including the non-farm payrolls. Traders will be watching these events closely with the bulls looking to reclaim control.

In summary, the USD/CAD currency pair is experiencing short-term downward pressure. However, the bulls will look to claim control in the coming days with the pair having recently hit oversold levels in the Relative Strength Index Indicator on the daily chart.