USD/CAD Exchange Rate Prediction – The Dollar Rallied Despite Weaker Yields

The dollar moved higher against most major currencies and gained traction on the Loonie on Tuesday. The dollar was buoyed despite weaker than expected U.S. data, including retail sales and homebuilder sentiment. U.S. yields declined, but this did not stop the dollar from gaining traction.

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).

Retail Sales Side Sentiment Also Drops

Retail sales for July declined by 1.1%, worse than the 0.3% decline expected. Most of the monthly decrease came from motor vehicles and parts dealers, which fell 3.9%. Online sales also posted a 3.1% drop. Sentiments among single-family homebuilders dropped 5 points to 75 on the National Association of Home Builders. The index stood at 78 last August. Of the index’s three components, current sales conditions fell 5 points to 81 and traffic of prospective buyers also fell 5 points to 60. Sales expectations in the next six months were unchanged at 81. Production at U.S. factories surged in July. Manufacturing output jumped 1.4% last month after falling 0.3% in June, the Federal Reserve said on Tuesday.