USD/CAD on the Defensive as Dollar Declines Amid Lackluster Macro Data

Insights

• The dollar fell against the Euro as peace talks weighed on the dollar’s appeal
• Yield spreads flattened yesterday as benchmark yields moved lower
• Gold and silver prices rose as the dollar and yields declined
• Oil prices recover amid the prospect of new Russia sanctions and tight supply

The dollar moves lower against the Loonie as rising oil prices boost the commodity-linked Loonie. A disappointing GDP report showing that economic growth stood at 7.1% put downward pressure on the dollar, as bulls were not impressed by the data. Benchmark yields mostly moved lower by several basis points as bond spreads flattened. The 5s-30s inversion faded yesterday. The inversion indicates the possible risk of recession from the Fed tightening interest rates. Gold prices rose as the dollar and yields slid. The dollar fell against other major currencies today as peace talks reduce the dollar’s safe-haven appeal and boost the Euro. Oil prices rose as the US and other western nations considered imposing more sanctions on Russia in industries that are crucial for sustaining the invasion of Ukraine. 

ADP stated that private payrolls rose by 455,000 in March, higher than expected. Economists anticipated that 450,000 new jobs would be created during the month. The previous month had 486,000. 161,000 new positions were created in leisure and hospitality, which led to gains. Hiring remains robust despite a tightening labor market driven by the Fed’s hawkish stance. This report comes two days before the closely watched nonfarm payrolls report, which shows job growth.

Technical Analysis

The USD/CAD moves lower as rising oil prices strengthen the Loonie. Downward pressure on the currency pair is expected. The currency pair dipped to a low seen near 1.243 before ticking up to the 1.248 area. Still, the pair is below the psychological critical level of 1.25. Resistance at the recent breakdown near 1.261 should cap gains. Support is seen at the horizontal trendline near the January lows of 1.245. USD/CAD broke through this level but retreated to the 1.248 region. Resistance is seen near the recent breakdown level near 1.261. Short-term momentum turns negative as the fast stochastic had a crossover sell signal.

The medium-term momentum is negative as the MACD line generated 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 moving average of the MACD line).