USD/CAD Price Prediction – The Dollar Surges as Yields Soar

The dollar surged higher as interest rate differentials moved in favor of the greenback following a stronger than expected U.S. CPI report. Consumer inflation hit a 30-year high in the U.S. and was also very strong. This news followed a stronger than expected U.S. PPI report reported on Tuesday. Yields also ralled, which weighed on riskier assets.

Technical analysis

The dollar moved higher on Wednesday. The exchange is trading above support near the 10-day moving average, 1.2415. Resistance is seen near the 50-day moving average at 1.2580. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices are overbought with the fast stochastic printing a reading of 99, above the overbought trigger level. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index is generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

Inflation Surges in the United States

The Burea of Labor Statistics reported that consumer inflation hit its highest point in more than 30 years. The consumer price index rose 6.2% year over year, the most since December 1990. That compared with the 5.9% estimate.  Monthly, the CPI increased 0.9% against the 0.6% estimate. Stripping out volatile food and energy prices, so-called core CPI was up 0.6% against the estimate of 0.4%. Annual core inflation ran at a 4.6% pace, compared with the 4% expectation and the highest since August 1991.