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USD/CAD continues to slide following the Fed’s hawkish rate hike

By:
David Becker
Updated: Mar 16, 2022, 19:49 UTC

USD/CAD declines as US benchmark yields reach highs.

USD/CAD continues to slide following the Fed’s hawkish rate hike

In this article:

Insights

  • The dollar continued to move lower against the Loonie after Fed rate hike
  • U.S. Benchmark Treasury yields rally after the announcement
  • Riskier assets rebounded amid hopes of Russia-Ukraine ceasefire talks
  • Commodity prices like oil continue to tumble due to Russia-Ukraine talks

The dollar fell against the Loonie following the Fed’s approval of the first-rate hike since 2019. U.S. Treasury yields surge amid the Fed’s hawkish stance. Gold prices slide as Russia-Ukraine talks indicate less safe-haven appeal for investors. Oil prices continue to fall as hopes of peace will increase supply. 

At the FOMC Meeting, the Federal Reserve approved its first interest rate hike in over three years. The rate hike will bring the benchmark rate up to 0.25%-0.5%. The FOMC penciled in rate hikes at the next six meetings for the year and hinted at more in 2023. The fed funds rate is projected to reach 1.9% by the end of the year.

Technical Analysis

The USD/CAD moved lower following the Fed’s announcement. The Fed rate hike can strengthen the U.S. dollar and result in a breakout. A breakout above the downward sloping trend line near 1.29 will get USD/CAD out of its nearly three-month-long range. Support near the 50-day moving average that comes in near $1.268. Resistance on the currency pair is seen near the 10-day moving average near 1.278. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal.

The medium-term momentum is negative as the MACD line generated a crossover sell 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 downward sloping, which likely points to downward prices.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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