USD/CAD Exchange Rate Prediction – USD/CAD Experienced Dead Cat Bounce

The USD/CAD edged higher on Monday following Friday’s drop. There was no direction from the Treasury market as it was closed for the Columbus day holiday. Despite the mixed U.S. payroll report, which showed some weakness, the Canadian job report exceeded expectations. This led to higher Canadian yields and pushed the interest rate differential in favor of the Loonie.

Technical Analysis

The dollar rebounded slightly against the Loonie, after breaking through support which is an upward sloping trend line that comes in near 1.2550, which is now resistance. Additional resistance is seen near the 10-day moving average at 1.2610. The 10-day moving average has crossed below the 50-day moving average which means that a short-term downtrend is in place. Short-term momentum has turned positive the fast stochastic generated a crossover buy signal. Prices are oversold as the fast stochastic is printing a reading of 8 below the oversold trigger level of 20 which could foreshadow a correction, 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 lower exchange rate.

Canadian Jobs Data is Robust

Canada’s payroll numbers were better than expected.  Payrolls grew at 193k full-time positions.  Canada’s jobs participation rate jumped to 65.5%, matching the pre-pandemic level.  Not only did the participation rate rise, but the unemployment rate fell to 6.9% from 7.1%.