USD/CAD Exchange Rate Prediction – The Dollar Slips on Softer Core CPI

The dollar eased versus the CAD for the second consecutive trading session following a softer than expected U.S. Core CPI report. U.S. yields moved lower which pushed the yield differential in favor of the Canadian Dollar. Later in the week, traders will need to absorb PPI and U.S. import prices.

Technical Analysis

The USD/CAD edged lower and trading in a very tight range support which is seen near the 10-day moving average at 1.2513. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term negative momentum is accelerating as the MACD (moving average convergence divergence) histogram is printing in negative territory with a declining trajectory, which points to lower prices.

On Wednesday, the U.S. Labor Department report that its consumer price index rose 5.4% in July year over year, in line with June’s figure and matching expectations. The Labor Department said CPI increased 0.5% on a month-over-month basis, matching a consensus forecast. Used car and truck prices, which rose rapidly between April and June as Americans looked to vacation, gained just 0.2% in July after a climb of more than 10% in the prior month. Core CPI only rose by 0.3% which was lower than forecast and below the June increase of 0.9%. The core figure is up 4.3% over the last year, a slight deceleration from June’s 4.5%.