The USD/CAD Decline Below the 200-day Moving average on Soft PPI

The dollar continued to trend lower versus the Loonie, as U.S. Treasury yields finally declined. A softer than expected U.S. Wholesale price report in conjunction with a larger than expected rise in U.S. jobless claims weighed on the greenback.

Technical Analysis

The USD/CAD moved lower on Thursday slipping through support which his now short-term resistance near the 200-day moving average at 1.25. Support is seen near the October lows at 1.2285. The 10-day moving average crossed below the 50-day moving average which means a short-term downtrend is in place. Prices are oversold as the fast stochastic is printing a reading of 10, below the oversold trigger level of 20. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell 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 negative territory with a downward sloping trajectory which points to a lower exchange rate.

 Core PPI Missed Expectations

Core PPI increased 0.4% for the month, below the 0.5% estimate. PPI for food and energy both fell during the month, declining 0.6% and 3.3%, respectively. The producer price index, which measures wholesale prices, was up 0.2% for the month, half the 0.4% expected. When measuring PPI year over year it came in at 9.7%, the highest increase going back more than a decade. Separately, initial jobless claims for the week ended January 8 totaled 230,000, well above the 200,000 estimates and a considerable increase from the previous week’s 207,000. Continuing claims, fell by 194,000 to 1.56 million, the lowest level since June 2, 1973. The four-week average for claims was 210,750, an increase of 6,250 from the previous week but still below the pre-pandemic level.