USD/CAD Edges Higher in the Wake of Fed Chair Powell’s Hawkish Comments

Insights

• The dollar edged lower as it lost its safe-haven appeal due to increased risk-on sentiment
• U.S. Benchmark Treasury yields jumped following Fed Chair Powell’s comments
• Gold and silver are under pressure as they lose their safe-haven appeal 
• Oil prices tumble as E.U. is split about whether it will join the Russian oil embargo

The dollar grinds higher against the Loonie as risk-on sentiment has led to a rally in equities and yields. U.S. benchmark yields climb higher despite the continuation of geopolitical conflict. The ten-year yield rose 6.4 basis points, reaching 2019 highs after Powell’s statement about the Fed potentially hiking rates 50-basis points in one of the upcoming meetings to crucial inflation. Gold prices dipped as yields surge as its safe-haven qualities are less appealing in a risk-on market. Oil prices tumbled, reversing yesterday’s gains as the E.U. decides whether to participate in the Russian oil embargo.

Investors begin to price in a 50-point rate hike in May. This action comes after Fed Chair Powell’s comments about how the Fed will be more aggressive about hiking rates a half-point if necessary to control mounting inflation. His comments resulted in a sharp sell-off of the bond market and created a rally in bond yields and equities. Furthermore, U.S. inventory data comes at later today, and analysts expect there to be no change in crude oil stocks.

Technical Analysis

The USD/CAD breaks above 1.26 after five consecutive trading session losses. USD/CAD crossed under the 200-day moving average, and the 100-day moving average crossed above the 50-day moving average. These technicals indicate a downward trend. Support is seen near the downward sloping trendline near 1.257. Resistance is seen near the 200-day moving average near 1.260. Short-term momentum has turned positive as the fast stochastic generated a crossover buy 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.