USD/CAD Exchange Rate Prediction – The Dollar Rebounds on Higher Yields

On Tuesday, the dollar rebounded against the loonie but was broadly lower against most major currencies. The U.S. yield curve continued to flatten, with the 2-year hitting a 21-month high while the 10-year yield eased. The U.S. yield curve is at the flattest level since November 2020, before many COVID vaccines are released. The market tells investors that a slow down could be underway if the Fed moves forward with tightening, which is expected as early as May of 2022. There continues to be a shortage of data released in the U.S. until later this week.

Technical Analysis

The USD/CAD moved higher on Tuesday, rebounding following Monday’s decline. Support is seen near an upward sloping trend line that comes in near 1.2780. Resistance on the USD/Cad is seen near the 10-day moving average at 1.2840. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This scenario 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). The MACD histogram is printing in negative territory with a downward sloping trajectory which points a lower exchange rate.