USD/CAD Exchange Rate Prediction – The USD/CAD Slides on Broad Dollar Weakness

The USD/CAD declined as U.S. yields moved higher following larger than expected inflation and consumer spending. The personal consumption expenditures price index, excluding the volatile food and energy components, climbed 0.3% after increasing by the same margin in July. On a headline basis, PCE prices rose 0.4% for the month and 4.3% year over year, the highest since January 1991. That reflected a 24.9% increase in energy prices and a 2.8% rise in food.

Technical Analysis

The dollar eased against the Loonie, reversing back through support which is now resistance seen near the 50-day moving average at 1.2618. Additional resistance is seen near the September highs at 1.2896. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a lower trajectory which points to a higher exchange rate.

Consumer Spending Rose along with Inflation

Spending accelerated 0.8%, slightly above the 0.7% forecast. On a headline basis, PCE prices rose 0.4% for the month and 4.3% year over year, the highest since January 1991. That reflected a 24.9% increase in energy prices and a 2.8% rise in food. The Fed’s favored gauge of inflation increased in September and continued to show strength. The core personal consumption expenditures price index, excluding food and energy costs increased 0.3% for the month and was up 3.6% from a year ago. The monthly gain was slightly higher than the 0.2% expected and higher than the consensus annual forecast of 3.5%.