Key Insights
- The dollar edged lower versus the Loonie.
- Treasury yields rose ahead of the Fed.
- The Quiet Period ahead of the FOMC has started
USD/CAD whipsawed and moved lower despite higher U.S. yields. The quiet period for Fed members has started ahead of their June 14/15 monetary policy meeting. The 10-year Treasury yield broke out and closed above 3%. Despite the rally, the yield differential moved in favor of the Loonie.
Last week yields continued to rise in the wake of a strong jobs report. The end of year Fed Funds futures contract is now pricing in rates of 2.70%, which implies another 100-basis points of tightening over the next 2-meetings.
Technical Analysis
The USD/CAD edged slightly lower. There is strong resistance near the 200-day moving average at 1.2658. Support is seen near the April 20th low near 1.246. The 10-day moving average crossed below the 50-day moving average which means that a short-term downtrend is now in place.
Short-term momentum has turned positive as the fast stochastic had a crossover buy signal. Prices are oversold. The fast stochastic is printing a reading of 12, below the oversold trigger level of 20.
Medium-term momentum turns negative as the MACD line might generate 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 M.A. of the MACD line). The trajectory of the MACD is in positive territory, which reflects an upward trend in price movement.
