USD/CAD Exchange Rate Prediction – The Loonie Gains a Foothold Despite Overall Greenback Strength

The USD/CAD gave back some of Monday’s gains following a trend line breakout on Monday. The dollar was broadly higher against most major currencies but failed to continue to gain traction versus the Loonie. U.S. yields were mixed with the 10-year yield rising after falling sharply on Monday. The economic highlight of the week for Canada is the May retail sales report on Friday. In the U.S. better than expected Housing Starts lifted the long end of the interest rate curve.

Technical analysis

The USD/CAD gave back some of the gains it experienced this week following Monday 1.2% gain.  The currency pair sliced through resistance which is now support near the April highs at 1.2658. Target resistance is seen near the February highs at 1.2864. Short-term momentum has turned negative as the fast stochastic generated a crossover buy signal. The movement from overbought on the fast stochastic near 91, down to 74, reflects accelerating short-term negative momentum. 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.

Yields Bounce On Strong Housing Data

U.S. long-term treasury yields bounced on Tuesday after tumbling on Monday due to safe-haven flows. Robust U.S. Housing Starts and Building Permits helped buoy U.S. Yields. According to the Commerce Department, Housing starts rose 6.3% in June. Building permits fell 5.1% in June.