USD/CAD Price Analysis: Bulls eye 1.3135 resistance ahead of US/Canadian data

• USD/CAD is underpinned by the USD rebound and WTI sell-off.
• Markets remain risk-averse ahead of key US ADP, Canadian GDP.
• Daily technical setup favors bulls, 1.3135 guards immediate upside.

USD/CAD is posting moderate gains in the European session this Wednesday, helped by widespread risk-aversion on increased bets of super-sized rate hikes by the ECB and the Fed.

Aggressive tightening by major global central banks to tame inflation could risk tipping their economies into recession. These fears are dominating and weighing negatively on investors’ risk appetite.

Fresh covid lockdowns and the energy crisis in China are also adding to the risk-off market environment and triggering a 3.50% sell-off in WTI prices. The oil price weakness is fuelling further upside in the major at the cost of the resource-linked CAD.

Markets also prefer to hold the safe-haven US dollar in the lead-up to the critical ADP jobs data and the Canadian Q2 GDP release. The data set could play a pivotal role in altering the Fed and Bank of Canada’s (BOC) rate hike pricing.

From a short-term technical perspective, USD/CAD is primed to challenge the horizontal trendline resistance marked at 1.3135, which is the first hurdle on the move higher.

The next relevant barrier is seen at the July 14 high of 1.3223. Ahead of that, bulls will challenge the 1.3200 round number.

The 14-day Relative Strength Index (RSI) is edging higher, comfortable above the midline, backing the bullish potential.

Further, the 21-Daily Moving Average (DMA) and 50 DMA bullish crossover remains in play, adding credence to the upside.

USD/CAD: Daily chart

On the flip side, the immediate support is aligned at the 1.3100 threshold, below which sellers will need to take out the daily low of 1.3063.

A sharp sell-off below the latter could kick in, opening floors for a test of the rising trendline support at 1.3000.

USD/CAD: Additional levels to consider