The USD/CAD Reversed Tuesday Breakout, as U.S. Yields Surge

Insights

• The dollar reversed most of its brea out against the Loonie
• U.S. yields moved higher, with the 2-year breaking to 14-month highs
• Risk assets rebounded despite continued geopolitics
• Commodity prices like Oil tumbled

The dollar reversed lower and failed to continue to break out. Short-term treasury notes broke out following a stronger than expected JOLTS report that showed the January market very strong. The Fed is expected to raise interest rates by 25-basis points, but after that, it will be waiting and see. A prolonged war will reduce the Fed’s likelihood to continue to raise rates.

Oil prices tumbled, and riskier assets rebounded despite a backdrop of war. The headline on the Wall Street Journal shows that Russian Airstrikes Hits Maternity Hospital. That does not appear likes it’s a de-escalation of tensions, and this phenomenon is not likely to end quickly.

Technical Analysis

The USD/CAD reversed Tuesday’s term break out and round resistance. Support near the 10-day moving average that comes in near $1.2749. Resistance on the currency pair is seen near 1.2901. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal.

The medium-term momentum is positive as the MACD line generated a crossover buy signal. This scenario happens when the MACD line (the 12-day moving average minus the 26-day moving average) crosses the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram prints positively. The trajectory of the MACD histogram is upward sloping, which likely points to upward prices.