USD/CAD Edges Higher Despite Broad Dollar Declines

The dollar was nearly unchanged versus the loonie, dropping sharply against most major currencies. The 10-year yield rose but higher Canadian yields offset the increase. All eyes will be on the U.S. unemployment report scheduled for Friday. The ADP private payroll numbers reflected the first decline in job gains since the initial stages of the pandemic. Purchasing manager’s survey’s in the U.S. showed a decline in jobs in the service sector.

Technical Analysis

The USD/CAD moved slightly higher despite a decline against most currencies. The exchange rate tested the 10-day moving average at 1.2673 and bounced. Resistance is seen near the 50-day moving average at 1.2713. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. The exchange rate has moved out of the 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.

Employment as Services Firms Declined

The ISM services employment index decreased to 52.3 from 54.7, signifying that employers continued to add workers, but less so than in December. The supplier deliveries index increased to 65.7 from 63.9, pointing to slower vendor performance, while the prices index edged down to 82.3 from 83.9, in a sign that prices continued to increase but at a slightly slower pace than the prior month.