USD/CAD Exchange Rate Prediction – The Dollar Surges to 2.5 Month Highs

The USD/CAD surged higher on robust dollar strength. This came despite the announcement by the Bank of Canada that they will begin tapering by reducing their bond purchase program by 1-billion, the Loonie failed to move higher. U.S. yields declined on the long end of the curve. New York Manufacturing rose to a record high, which helped buoy Treasury yields and the greenback. The Labor Department reported a pandemic level low for U.S. jobless claims.

Technical analysis

The USD/CAD surged higher on Thursday, hitting nearly a 3-month high. The currency pair is poised to test resistance near the April highs at 1.2658. Support is seen near the 10-day moving average at 1.2465. Short-term momentum is positive as the fast stochastic generated a crossover buy signal. The exchange rate is overbought. The current reading on the fast stochastic is 98, above the overbought trigger level of 80 which foreshadows a correction. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram prints in positive territory with an upward sloping trajectory which points to a higher exchange rate.

Powell Was on the Hill Again

Fed Chair Jerome Powell did his second leg of his testimony on Thursday in front of Congress. Today was in front of the Senate. The Fed Chair stuck to the script and continued to say that inflation remains transitory. Manufacturing remain buoyed. The New York Federal Reserve reported that the Empire State Manufacturing Survey, rose to a record 43 for July. New orders and shipments surged, while the employment index increased 8.3 points to 20.6 as 29.5% of companies indicated they would be adding workers. A forward-looking index on conditions over the next six months also showed a hiring increase, with a reading of 43.9, up 2.2 points from June.