USD/CAD Exchange Rate Prediction – The Dollar Slips Despite Solid Import Prices

The dollar continued to slide following the softer than expected U.S. CPI report. The dollar was lower most other major currencies as traders awaited the Fed decision. Tuesday’s consumer price report showed a deceleration in inflation expectations which weighed on the greenback. Powell is likely hold off on tapering to a least the November Fed meeting.

Technical Analysis

The USD/CAD eased but remained above support near the 10-day moving average at 1.2610. Additional support is seen near the 50-day moving average at 1.2580. Short-term momentum has flip flopped and turned negative as the fast stochastic generated a crossover sell signal. Medium-term negative momentum has decelerated as the MACD (moving average convergence divergence) index generated is poised to generate a crossover buy signal. This situation 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 positive territory after recently generating a crossover buy signal. This points to higher prices for the USD/CAD.

Inflation in the U.S. Decelerates

Inflation in the U.S. decelerated, according to the Labor Departments CPI report. Both headline and core cpi came in softer than expected. According to the Labor Department, the consumer price index increased by 0.3% month over month compared to expectations that it would rise by 0.4%. CPI excluding food and energy came in at 0.1% in August compared to expectations that it would increase by 0.3%. Core CPI came in at 4% year over year.