USD/CAD Exchange Rate Prediction – The Dollar Drops on Unexpected PPI

The USD/CAD tumbled following the softer than expected U.S. PPI data. The dollar was mixed against most major currencies. Lower yields in both the long and short end of the curve weighed on the greenback.  The producer price index increased 0.5% in September and increased 8.6%, year over year which was a fresh record for a data series. Excluding food and energy, the core PPI rose just 0.1% versus the 0.5% forecast, putting the 12-month gain at 5.9%, the highest level since March 1982.

Technical Analysis

The dollar dropped against Loonie, after breaking through support, an upward sloping trend line that comes in near 1.2550. Resistance is seen near the 10-day moving average at 1.2515. The 10-day moving average has crossed below the 50-day moving average which means that a short-term downtrend is in place. Short-term momentum has reversed and turned negative the fast stochastic generated a crossover sell signal. Prices are oversold as the fast stochastic is printing a reading of 2 below the oversold trigger level of 20 which could foreshadow a correction, Medium-term momentum has turned negative the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a lower trajectory which points to a lower exchange rate.

Jobless Claims Fall More than Expected

According to the U.S. Labor Department, jobless claims fell below 300,000 for the first time since the early days of the Covid-19 pandemic. First-time claims for unemployment insurance totaled 293,000, the best level since March 14, 2020, which saw 256,000 claims just as the Covid-19 spread intensified. Expectations were for claims to fall to 318,000. The four-week moving average dropped to 334,250, a 10,500 decline that also marked the lowest number since March 14, 2020. Continuing claims, which run a week behind the headline number, fell by 134,000 to 2.59 million, another pandemic-era low.