USD/CAD Exchange Rate Prediction – USD/CAD Rises Following Additional Inflation News

The USD/CAD continued to rally on Tuesday, running into target resistance as the dollar gained traction against all major currencies.  The better than expected U.S. Case Shiller Housing Price Index buoyed U.S. treasury yields which paved the way for a higher greenback. 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. On Wednesday the U.S. will also release ADP private payroll data as well as the Chicago PMI data. At the end of the week the U.S. will release non-Farm payrolls which are expected to rise by 550K.

Technical Analysis

The USD/CAD surged higher on Tuesday and barely cleared resistance near the 100-day moving average seen near 1.2386. Support is seen near the 10-day moving average at 1.2339. The 10-day moving average is poised to cross above the 100-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.

Home Prices Rise in April

Inflation expectations continue to be the critical driver of the dollar versus the loonie. Higher inflation expectations continue to buoy the U.S. 2-year yield which is helping to buoy the greenback. The S&P and Case Shiller reported that housing price gains have been expanding for the last 11 as demand continues to outstrip supply. According to the S&P CoreLogic Case-Shiller National Home Price Index, home prices rose 14.6% in April, up from a 13.3% increase in March.