USD/CAD Exchange Rate Prediction – The USD/CAD Falls on broad Dollar Weakness

USD/CAD moved lower as the dollar dropped and U.S. Treasury yields declined. Fed Chair Jerome Powell was more dovish and expected and continued to discuss that he felt that inflation is transitory. The reaction of the 10-year yield to the Fed Chair’s comments says that the market understands that tapering bond purchases is not the same as raising interest rates. Inflation is declining, reported in the consumer expenditure report released on Friday by the Commerce Department.

Technical Analysis

The USD/CAD declined on Friday following the Fed Chair speech. Support is seen near the 200-day moving average at 1.2545. Resistance is seen near the August highs 1.2949. Short-term momentum has turned positive the fast stochastic generated a crossover buy signal. Medium-term upward momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This situation occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).

Inflation Decelerates

The spending and income report showed inflation pressures eased last month but remained elevated. Consumer expenditures rose 0.4% last month, lower than the prior month’s 0.5% gain. Core prices, which strip out food and energy costs, increased 0.3% in July from a month earlier, slower than June’s 0.5% gain. Compared with a year ago, overall prices rose 4.2%, and core prices were up 3.6%.