USD/CAD's ascent faces Bi-monthly ceiling amid political and economic flux

In a week shadowed by a dense economic calendar and the specter of political ambiguity in the United States, markets are displaying a state of volatility. Former President Donald Trump, now a candidate, has remained in the presidential race following a U.S. Supreme Court ruling invalidating state-level attempts to disqualify him.

The fall in the 10-year Treasury yields has diminished the allure of the dollar while assets like gold and Bitcoin have soared to their all-time-highs. However, short-term profit-taking pauses in the rallies of Bitcoin and gold, has introduced a new dynamic to the valuation of non-dollar assets. While Bitcoin teeters near its all-time high, and gold takes a breather on its upward climb toward an unprecedented $2145, investors are adjusting their strategies ahead of key economic data.

Market impact events

While China’s economic growth forecast led to a slump in oil prices and weakened the Canadian dollar, the market braces for the US ISM Services PMI due Tuesday afternoon, expected to drop by 0.4 to 53. Outperforming forecasts could reinforce the dollar.

Concurrently, Wednesday's focus will turn to the Bank of Canada meeting and the Ivey PMI—two pivotal Canadian events that could significantly influence market sentiment.

USD/CAD daily chart dynamics

The USD/CAD, on its daily chart, has for the fifth consecutive day continued its uptrend, meeting robust two-month resistance at 1.35854—located at the 61.8% Fibonacci retracement level of the previous downward trend—while still trading above the 50% retracement support at 1.35379.

The continuation of the uptrend hinges on the market's reassessment of the dollar's standing. Should upcoming economic data favor the dollar, the next resistances are anticipated near overlapping Fibonacci correction and expansion areas around 1.36228 and 1.36834.

The RSI and MACD indicators continue their bullish indication, supporting the uptrend along with moving averages which all align in an ascending pattern.

Alternative Scenario: A Potential Dollar Downturn.

In contrast, the continued lack of dollar appeal in the market may encourage USD/CAD sellers to test the support at 1.35379.

Should this level fail to hold, a price drop towards the 38.2% Fibonacci retracement level at 1.34530 and further towards the moving averages could ensue.