USD/CAD Exchange Rate Prediction – The Dollar Continues to Rally

The USD/CAD moved higher on Wednesday and continues to break out as Treasury yields move higher. Commentary from the Fed meeting minutes appears to have lifted the greenback. Refinance rates in the U.S. declined more than 5% as higher yields have capped the mortgage demand.

Technical analysis

The dollar moved higher and hit a high for August, on broad dollar weakness. Support is seen near the 20-day moving average at 1.2534.  Resistance is seen near the July highs at 1.2807. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This 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).

Fed Meeting Minutes

Federal Reserve officials at their July gathering made plans to pull back the pace of their monthly bond purchases likely before the end of the year, meeting minutes released Wednesday indicated. However, the summary of the July 27-28 Federal Open Market Committee gathering indicated that the central bankers wanted to be clear that the reduction, or tapering, of assets, was not a precursor to an imminent rate hike.