Key Insights
- The dollar rebounded sharply against the Loonie.
- Treasury yields broke out.
- Jobless claims were weaker than expected.
USD/CAD surged and rebounded, breaking through short-term resistance. The 2-year yield rose to help to generate tailwinds for the greenback. Stronger than expected headline and core CPI spooked market participants.
Consumer prices surged higher, rising to a 40-year high, rising 8.6% yearly, hotter than the 8.3% expected. This report shows that headline inflation remains strong due to energy, food prices, and shelter. Excluding volatile food and energy prices, core CPI was up 6%, slightly higher than the 5.9% estimate. Monthly, headline CPI was up 1% while core rose 0.6.
Technical Analysis
The USD/CAD rebounded sharply. Target resistance is seen near the May highs at 1.3070. Support is seen near the 200-day moving average near 1.2660. The 10-day moving average crossed below the 50-day moving average, which means that a short-term downtrend is now in place.
Short-term momentum has reversed and turned positive as the fast stochastic had a crossover buy signal.
Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.
