USD/CAD Exchange Rate Prediction – The Dollar Continues to Gain Traction

The USD/CAD continued to rebound, despite declining U.S. treasury yields. U.S. Treasury yields declined but were slower than Canadian short-term yields, which pushed the yield differential in favor of the greenback. With inflation expected to continue to grind higher and hyperinflation around the corner, the dollar gained traction according to Twitter CEO Jack Dorsey.

Technical Analysis

The dollar rebounded on Monday against the Loonie. Prices recaptured former resistance now short-term support at the 10-day moving average at 1.2379  Additional support is seen near the July lows at 1.2308. Resistance is seen near the 50-day moving average at 1.2593. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices are no longer oversold as the fast stochastic is printing a reading of 24 above the oversold trigger level of 20. Medium-term momentum is negative but decelerating as the MACD histogram is printing in negative territory, but the historical trajectory is rising, which points to consolidation.

Chair Power Sees Inflation Higher for Longer

Federal Reserve Chair Powell and Secretary of State Janet Yellen separately discussed that recent disruptions in the supply chain and tight labor market conditions would buoy price pressures for longer.  Yellen sees the higher inflation readings persisting through Q2 next year.  Before the weekend, Powell argued that the Fed was positioned to manage a range of inflation outcomes.