USD/CAD Exchange Rate Prediction – The Dollar Breaks Out

The dollar broke out following weaker than expected Chicago PMI data and strong inflation rhetoric from Fed Chair Jerome Powell. Consumer confidence also dropped to a 9-month low. Powell, in a statement, said the Fed would accelerate its bond purchase program, which could set the Fed up for a rate hike as early as May.  Yields were mixed, which flattened the curve.

Technical analysis

The dollar broke out closing above resistance which is now support at 1.28. Target resistance is seen near the September highs at 1.29.  The 10-day moving average cross above the 50-day moving average, which means that a short-term uptrend is almost in place. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. The exchange rate is overbought with the fast stochastic printing a reading of 95, above the overbought trigger level of 80. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index is 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).

Consumer Confidence Falls

U.S. consumer confidence dropped to a nine-month low in November. The Conference Board’s Consumer Confidence Index fell 2.1 points to 109.5 in November, after posting an increase in October. The Present Situations Index, fell to 142.5 in November from 145.5 the previous month. The Future Expectations Index, which assesses how consumers feel about the short-term outlook for income, business and employment conditions, fell to 87.6 from 89.