The Dollar Reverses on Soft Prices Paid PMI Report

On Monday, the dollar reversed course, moving lower versus the Loonie and against most major currencies. Treasury yields were lower, despite continued jawboning from the Fed that rates will move higher. In the latest Chicago purchasing managers index, some bright spots showed that inflation was easing and bottlenecks were clearing.

Technical Analysis

The USD/CAD reversed course on Monday and moved lower against the Canadian dollar. The exchange rate slipped through support, which is now short-term resistance near the 50-day moving average at 1.2711. Support is seen near the 10-day moving average at 1.2622. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The exchange rate has moved out of overbought territory which also reflects accelerating negative momentum. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in positive territory with an upward sloping trajectory which points to a higher exchange rate.

Prices Paid by Suppliers Retreats

Chicago business barometer sub-component showed that the prices-paid index softened 1.9 points to an eight-month low, just below the high 12-month average of 89.1. This report should be a welcome sign for inflation hawks. Meanwhile, the supplier deliveries gauged strengthened to 87.6, although some firms began to see the easing of supply chain disruptions, while others found that Covid outbreaks had impacted lead times.