USD/CAD Exchange Rate Prediction – The Dollar Rallies as Yield Differential Favors the Greenback

The dollar rallied against the Loonie and against most major currencies as the Treasury yield curve rose, led by gains in the short-end. Other global yields accompanied higher U.S. Treasury yields, but the yield differential moved in favor of the greenback, helping to buoy the greenback.  Stronger than expected July Housing prices were offset by lackluster consumer confidence. The spread of the delta variant seems to have an impact on confidence.

Technical Analysis

The dollar rallied Loonie bouncing near support at the 50-day moving average at 1.2612. Resistant is seen near the 10-day moving average at 1.2708. Prices bounced from oversold territory as the fast stochastic generated a crossover buy signal. This is a sign of accelerating positive momentum. 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 rising trajectory which points to a higher exchange rate.

Housing Prices Rise but are Offset by Weak Consumer Confidence

The S&P CoreLogic Case-Shiller national home price index surged a record 19.7% in July year over year, accelerating to 18.7% in June. This positive housing number was offset by weaker U.S. consumer confidence which fell to a 7-month low in September. The Conference Board said its consumer confidence index dropped to a reading of 109.3 this month from 115.2 in August. The third straight monthly decline pushed the index to the lowest level since February.