USD/CAD Exchange Rate Prediction – The Loonie Edges Higher Ahead of US Inflation Data

The dollar moved higher against the Loonie on continued broad dollar strength. Strong gains in Treasury yields continued following Monday’s record jobs opening report. U.S. Treasury yields moved higher and continue to rebound despite the spread of the delta variant throughout the southern portion of the United States. During the week’s balance, investors will need to absorb a plethora of inflation information as the United States releases the consumer price index, the producer price index, and import prices.

Technical Analysis

The USD/CAD edged lower and trading in a very tight range and failed to recapture resistance seen near the 200-day moving average at 1.2574. Support is seen near the 100-day moving average at 1.2369. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in negative territory with decelerating trajectory, which points to consolidation.

Riskier assets continue to grind higher, despite gains in the greenback and U.S. Treasury yields. The strong U.S. treasury yields will lead to a change in the yield differential, which could favor the greenback over other currencies. The general market consensus is that the Federal Reserve will begin to taper its bond purchase program later in the fall of 2021.