USD/CAD Exchange Rate Prediction – USD/CAD Rises Following U.S. CPI Report

The USD/CAD moved higher on Tuesday, driven by dollar strength again most major currencies. U.S. Treasury yields surged following the stronger than expected U.S. CPI.  Consumer inflation surged in June at its fastest pace in nearly 13 years. The consumer price index increased 5.4% year over year compared to expectations for a 5% gain. Month over month headline and core prices rose 0.9% against 0.5% estimates. Core CPI, which removes food and energy, rose 4.5%, well above the forecast of 3.8%. Stronger U.S. yields are driving the interest rate differential in the greenback’s favor which is helping to buoy the currency pair. Prices are forming a bull flag continuation pattern which points to a higher exchange rate.

Technical Analysis

The USD/CAD rebounded on Tuesday and closed higher after bouncing near support at an upward sloping trend line that comes in near 1.2435 and the 10-day moving average at 1.2435. Target resistance is seen near the April highs at 1.2657. Short-term momentum flipped-flopped and has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum remains positive as the MACD (moving average convergence divergence) histogram prints in positive territory with an upward sloping trajectory which points to a higher exchange rate.

The RBC Meets on Wednesday

Ahead of the Bank of Canada’s meeting on Wednesday, Carolyn Rogers was promoted to Senior Deputy Governor. This position is the spot that was held prior by by Carolyn Wilkins, who decided to leave the RBC in December 2020, after getting bypassed as head of the RBC.