USD/CAD Moves Lower Amid Rising Oil Prices and Strong Canadian Inflation Data

Key Insights

• Gold and silver prices declined as benchmark yields rose.
• Treasury yields rally as Fed Chair Powell speaks on the global economy at IMF.
• Oil prices recover due to lingering supply concerns.

USD/CAD faces downward pressure as risk-on sentiment generated a sell-off of the safe-haven greenback. Benchmark yield continued to rise as Fed Chair Powell speaks on the global economy at IMF. Investors show concerns about spiraling inflation and aggressive monetary policy. 

Gold prices moved lower as treasury yields continued to surge. There is more risk-on sentiment in the market. Oil prices moved higher in a narrow range in the wake of the IMF reducing economic growth expectations and supply losses from Libya.

Weekly jobless claims came in at 184,000, decreasing by 2,000 from the previous week. The Dow Jones estimate was 182,000. The data signals that the job market remains tight.

The number of job openings and demand for workers exceeded the labor pool. While the job market has shown progress, it has not caught up to pre-pandemic conditions.

The Philadelphia Manufacturing Index, which measures orders, delivery times, and shipments, came in at 17.6. This reading showed a decline of 10 points from March. delivery times. Manufacturing expanded but at a slower-than-expected pace.

Technical Analysis

The USD/CAD drops to a two-week low but recovers as risk-on sentiment drove investors to sell the dollar. The currency pair declined to the mid-1.24s before rebounding to the 1.25 level.

Rising oil prices and strong Canadian inflation data underpinned the Loonie. However, hawkish Fed policy will limit losses and influence the dollar. Resistance is seen near the 10-day moving average of 1.258. Support is seen near the March 25th low near 1.246.

Short-term momentum turned negative but is decelerating as the fast stochastic had a crossover sell signal. Medium-term momentum is positive but decelerating as the MACD line might generate a crossover sell 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 MA of the MACD line).