USD/CAD Exchange Rate Prediction – The Dollar Rallies Following Robust ISM Services Report

The  USD/CAD moved higher on Wednesday as the U.S. ISM Services report surge offset the let-down provided by ADP private payrolls. Price action whipsawed as the dollar initially sold off. But yields moved higher, buoying the greenback following the ISM service report released about 100-minutes after the ADP report.

Technical Analysis

The USD/CAD moved higher on Wednesday, driven by broad dollar strength. Prices sliced through former resistance now support at the 10-day moving average at 1.2527. Target resistance is seen near the July highs at 1.2807. Short-term momentum is positive as the fast stochastic generated a crossover buy signal in oversold territory. The fast stochastic moved from a reading below the oversold trigger level up to 33, which reflects accelerating positive momentum. Medium-term negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in negative territory with a rising trajectory which points to consolidation.

Strong Service Sector Counters Weak Employment Figures

Private payrolls grew at a decelerating rate and only increased by 330,000 positions in July, a sharp deceleration from the 680,000 increase in June. The number was well below the 653,000 estimates. A robust services report offsets this. According to the Institute of Supply Management, its non-manufacturing activity index surged to 64.1 in July, the highest reading in the series’ history. Expectations were for the index to edge higher to 60.5. The ISM survey’s measure of new orders increased to 63.7 from 62.1 in June.