USD/CAD Exchange Rate Prediction – The USD/CAD Rises on Broader Dollar Gains

The USD/CAD rebounded sharply on Monday as the dollar gained traction against all major currencies.  The move in the greenback came despite lower U.S. Treasury yields which came following weaker than expected Dallas Fed numbers. The USD/CAD closed at the highs of the trading session, making a lower high and a higher high, sign of upward momentum. The next Canadian data point is the monthly GDP on Wednesday.  StatsCan has estimated that April GDP likely contracted by around 0.8% in April after a 1.1% expansion in March.

Technical Analysis

The USD/CAD traded sideways, bouncing at bouncing 1.25% for the week. Support is seen near the 10-day moving average at 1.2319. Resistance is seen near the 100-day moving average at 1.2396. The 10-day moving average crossed above the 50-day moving average, which means that a short-term uptrend is now in place. Short-term momentum is positive as the fast stochastic generated a crossover buy signal. The MACD (moving average convergence divergence) histogram is printing in positive territory with a declining trajectory which points to consolidation. The choppy price action and the decelerating momentum points to a currency pair that is likely to experience sideways price action.

Strong Inflation Fails to Buoy Yields

Despite the scare of inflation, the U.S. Treasury yields continue to ease. On Monday the Dallas Fed reported that the labor market measures suggested solid employment growth. The employment index was steady at 22.9, with 32% noting net hiring and 9% reporting net layoffs. Input prices and wage pressures continued to pick up pace in June. The raw materials prices index climbed to an all-time high of 80.8, and the finished goods prices index also reached new heights, coming in at 42.8. The wages and benefits index also set another record high of 48.1, up nine points from May.