USD/CAD Falls As Focus Remains on Geopolitical Tensions and the FOMC Meeting

Insights

• The dollar moves lower against the Loonie amid risk-off sentiment 
• U.S. benchmark yields slide
• Risk assets rebounded fall amid hopes of Russia-Ukraine ceasefire talks
• Commodity prices like oil continue to tumble

The dollar edged lower against the Loonie as the focus remains on the FOMC meeting and geopolitical conflict. U.S. Treasury yields dip ahead of the FOMC meeting tomorrow. Gold prices move lower as there is reduced demand for the safe-haven asset due to ceasefire talks. The FOMC meeting tomorrow will discuss the rate hike, pace of balance sheet unwinding, and inflation forecasts.

February U.S. producer prices rose 10% from a year ago. The producer price index (PPI), which tracks inflation before reaching consumers, climbed 0.8%. Mounting inflation pressures following the pandemic and the current geopolitical conflict fueled heightened producer prices.

Technical Analysis

The USD/CAD rose to nearly CAD1.29 before falling as risk-off, and geopolitical uncertainty sentiment weighed on the exchange rate. The Fed rate hike can result in a breakout. A breakout above the downward sloping trendline near 1.29 will get USD/CAD out of its nearly three-month-long range. Support near the 10-day moving average that comes in near $1.276. Resistance on the currency pair is seen near 1.2901. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal.

The medium-term momentum is positive as the MACD line generated a crossover buy signal. This scenario happens when the MACD line (the 12-day moving average minus the 26-day moving average) crosses the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram prints positively. The trajectory of the MACD histogram is downward sloping, which likely points to downward prices.