The Dollar Surges on Flight to Safety

On Monday, the dollar surged higher against the Loonie and gain traction against most major currencies. The upward movement in the greenback came despite a decline in U.S. Treasury yields which edged lower. The Fed is scheduled to meet on Tuesday and Wednesday and announce their monetary policy decision. The worse than expected flash PMI data shows that economic growth might be recoiling in the wake of the Omicron variant and higher U.S. yields.

Technical Analysis

The USD/CAD surged higher on Monday as riskier assets tumbled. Support is seen near the 10-day moving average on near 1.2543. Resistance is seen near the 50-day moving average at 1.2703. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. 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.

 The sentiment is Slowing at Purchasing Managers

The flash U.S. Manufacturing and Services PMI’s reported by HIS Markit showed that manufacturing and services both fell in January. These were the lowest prints on sentiment by purchasing managers in the last 18-months. The U.S. manufacturing PMI fell to 55 while the services PMI fell to 50.9. The compositive PMI came out at 50.8 compared to expectations that it would decline slightly to 57.